Western Digital and Kioxia Rumored Back at the Table; We’re Skeptical of Immediate Value Creation

Our $50 fair value estimate for Western Digital is unchanged after further rumors of a flash business tie-up with Kioxia sent shares up 7% on Jan 23. We maintain our thesis that Western Digital’s flash business is overly discounted by the market and that execution will be the driver of fundamental value creation. We believe that a spinoff would likely be rewarded by the market, but it wouldn’t immediately unlock fundamental value, in our view, without better execution, which we think has been lacking.