Western Digital will separate its flash-memory and traditional hard-drive businesses, the company said Monday. WDC stock jumped on the news.
The technology hardware company said Monday it will form two independent public companies. The plan is expected to close in the second half of next year. The announcement came as Western Digital announced quarterly earnings that topped expectations.
On the stock market today, WDC stock closed at 41.80, up 7.26%.
Split Follows Reported End To Merger Talks
The plan for the spinoff comes a week after Western Digital reportedly pulled away from long-rumored merger talks with Kioxia Holdings, which also makes memory chips.
WDC stock fell 9% after the report, from Nikkei, on Oct. 26.
Activist investor Elliott Management has been pushing for Western Digital to spin off its memory-chip business for more than a year. The company has struggled as demand for flash chips cooled in the past couple years.
"Our (hard disk drive) and flash businesses are both well positioned to capitalize on the data storage industry's significant market dynamics, and as separate companies, each will have the strategic focus and resources to pursue opportunities in their respective markets," Western Digital Chief Executive David Goeckeler said in a statement announcing the deal.
WDC Stock: Revenue Beats Estimates
Also, Western Digital reported fiscal first quarter earnings Monday showing an adjusted loss of $1.76 per share on $2.75 billion in revenue. That was better than an expected $1.91 adjusted loss per share on $2.66 billion in sales, according to FactSet.
Still, the adjusted loss is down from earnings of 20 cents per share for the same quarter last year.
For the fiscal second quarter, Western Digital is targeting a loss of $1.35 to $1.05 a share, a narrower loss than analysts were expecting from the company's guidance.
WDC stock has an abysmal IBD EPS Rating of 5 from a best-possible 99, underscoring its earnings struggles.
Further, WDC stock has an IBD Composite Rating of 63 out 99, according to IBD Stock Checkup.
