Elliott Becomes the Latest, and Largest, to Call for Western Digital Split; No Change to $70 FVE

On May 3, activist investor Elliott Management announced a 6% stake in Western Digital and called upon the board to consider a bifurcation of the hard disk drive (HDD) and flash businesses. We aren’t particularly surprised by the news, as Western’s flash business has been scrutinized by media and investors alike ever since its 2016 SanDisk acquisition. We have long viewed Western Digital’s unique combination as overdiscounted by the market, and while we see the merits of a split, we’re skeptical of it being an immediate fix-all. We think the market agrees with Elliott, as shares popped 15%, though we still view Western as modestly undervalued to our $70 fair value estimate.