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Here's Why Western Digital Is a Good Long-Term Buy

June 19, 2014 | About:

Since the start of the year, Western Digital (NASDAQ:WDC) was soaring in the double digits till the recent sell-off in tech stocks started. However, the storage company has been consistent in the last couple of quarters. Also, the outlook for the storage company looks solid as expected growth in data storage is almost certain going forward.

In addition, Western Digital has outstripped its rival Seagate Technology (STX) in performance as its results were comparatively better that Seagate. Hence, investors should consider taking a close look at Western Digital for their portfolio since the company could be a good long-term winner.

Superior performance

Weston Digital enjoys market share of 45% in the storage market. Meanwhile its peer Seagate has about 40% market share. Moreover, Western Digital has observed strapping momentum across its product portfolio of late that should help it in gaining additional market share going forward.

Let’s quote a few facts here - the total addressable market (TAM) for hard drives grew about 6 million units year-on-year to 142 million. And the biggest gainer was Western Digital which took away a larger portion of this, as it recorded handy growth of 4% in revenue and a substantial 29% growth in its net profit year-on-year. This is in contrast with Seagate, which on the other hand ended up losing 4% in revenue along with a 13% slump in its earnings.

The total addressable market was well above the company’s expectations in the last quarter, and drove demand for most of its products as Western Digital shipped nearly 63 million units. A robust show from the gaming segment and a seasonal pick-up in sales of branded products are proving to be major tailwinds for the storage company. Also, Western Digital expects this momentum to carry on with increase in total exabytes shipped, along with strong response from customers. This should help the company fetch even bigger market share in the future.

Opportunities ahead

In addition, there are plenty of good opportunities for the company in the fast-changing IT infrastructure scenario, where cloud computing is gaining traction. Also, Western Digital is strategically offering value added products, customizing it according to the level of customers that will help the company crack this market and drive its growth in the long run. Besides, the company has experienced good growth in its “WD My Cloud” comprehensive cloud solutions and its 6-terabyte helium-based sealed drive, are attracting many a clients across the world.

Apart from this, its enterprise class solid state drives (SSD) are doing well in the market and are expected to perform even better in coming months. According to management, in the previous quarter, Western Digital’s enterprise revenue grew at a faster rate than the overall SSD enterprise market. The company has made some good moves in this department that are driving its results, such as the acquisitions of Virident and sTec.

Western Digital had acquired both these companies last year. The sTec acquisition enabled Western Digital to gain hold over more than a 100 SSD-related patents, while Virident helped it strengthen its position in flash storage hardware and software. These acquisitions have played a key role in improving Western Digital’s position in the industry. Further, as Western Digital continues integrating these new acquisitions into its business, it should be able to bring more customers to its product offerings.

As it looks ahead, Western Digital anticipates good progress in the global economy as the PC market is getting stabilized. Also, the company is making various strategic investments across the product portfolio that will certainly support its growth in the future.


Western Digital does have a competitive advantage over its peer Seagate that will help the company to gain additional market share in the storage market. The company has made smart acquisitions of late and is focusing on product innovation as well to improve its standing. So, investors should definitely take a look at Western Digital from an investment point of view.

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