WDC - Possible Western Digital Kioxia deal could challenge Samsung in NAND: analyst

2023-05-17 08:06:41 ET

Western Digital ( WDC ) is reportedly getting closer to a merger agreement with Japanese memory manufacturer Kioxia and if a deal happens, the combined flash entity could "challenge" Samsung ( OTCPK:SSNLF ) for market share leadership in NAND, investment firm Benchmark said.

Analyst Mark Miller, who has a hold rating on Western Digital ( WDC ) shares, noted that the merged firm is likely to be public after a deal and it could spin out Western Digital's hard disk drive business before a combination of the flash units occur.

"While the devil will be in the details, due to the current depressed memory market, short-term we see modest upside from such a deal with most of the value coming from the HDD unit spin-out," Miller wrote in an investor note.

Miller added that if Kioxia is combined with Western Digital ( WDC ), the larger entity would have a combined loss of $2.67B over the current and prior quarters, with losses likely to continue into next year.

Assuming a deal happens, much of Western Digital's ( WDC ) debt would likely go to the combined flash firm, but there is an opportunity for "significant synergistic savings," Miller explained, with much of that coming from Western Digital.

"Depending on the degree of synergistic savings, the return to profitability for the combined  flash venture may be accelerated," Miller posited.

More on Western Digital

• Western Digital gains on report talks with Kioxia speeding up
• Western Digital trading at 'attractive valuation' following Q3 results, guidance: Baird
• Western Digital's results unlikely to cause 'significant' sentiment shift: Wells Fargo

For further details see: