Kaufman Brothers Cuts Western Digital to Sell

Analyst Shebly Seyrafi notes a price battle since early February in the hard disk drive industry

Kaufman Brothers downgraded the technology company Western Digital (WDC) to sell from hold, noting a price battle that has started since early February in the Hard Disk Drive (HDD) industry.

Analyst Shebly Seyrafi says that Western Digital has started aggressively pursuing Maxtor (MXO)'s HDD business, in anticipation of revenue attrition expected at Maxtor as Seagate Technology (STX) acquires Maxtor. The analyst expects Western Digital's unit sales in the March quarter to be consistent with the December quarter, but thinks the price battle has triggered price declines of about 10% to 12%. He says that the ASP of a typical 80GB desktop drive has dropped in price during recent months from about $50 to $44 (when adjusted for rebates and discounts.) He cut his $1.52 fiscal year 2006 (ending June) earnings per share (EPS) estimate to $1.38, and his $1.83 estimate to $1.71.

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