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Western Digital Hits 15-Year Peak on Talk of Buyout

Western Digital Corp., the maker of hard drives and home-entertainment devices, reached its highest in more than 15 years on speculation the company may go private following the potential buyout of Dell Inc. (DELL)

Western Digital, based in Irvine, California, advanced 5.7 percent to $47.36 at the close in New York, the biggest gain since Dec. 5 and the highest closing price since September 1997.

Dell, the Round Rock, Texas-based personal computer maker, is in talks to go private, Bloomberg News reported last week, citing people with knowledge of the situation. Funding from Microsoft Corp. (MSFT) may help clinch the buyout by Silver Lake Management LLC, people said today. If that deal moves forward, Western Digital would also be a takeout candidate, said Mark Miller, an analyst at Noble Financial Capital Markets.

“Western Digital could follow,” Miller, a former research manager at Western Digital, said in a telephone interview.

Steve Shattuck, a spokesman for Western Digital, declined to comment.

As a private company, Western Digital wouldn’t have to respond to public shareholder demands and could increase its cash flow, Miller said.

“Its cash flows could be $4 billion to $5 billion a year in a few years,” Miller said.

The company generated $3.65 billion in cash from operations in the past four quarters, according to data compiled by Bloomberg.

Investor sentiment on Western Digital has also turned positive after Seagate Technology Plc (STX) recently raised its sales forecast, Miller said. Seagate, based in Dublin, Ireland, rose 7.1 percent to $37.89, its highest close since December 2002.

“Things are not as bad as people thought,” he said.

To contact the reporter on this story: Karl Baker in New York at kbaker30@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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