US flash memory and hard drive maker Western Digital announced Jan. 31 that the Apollo fund and Elliot hedge fund have invested $900 million in convertible stock in it. According to sources interviewed by Bloomberg, this funding will be a prerequisite for a merger with Japan’s Kioxia.
“This investment strengthens Western Digital’s financial position and flexibility as the company continues to consider its strategic options to optimize long-term value for its shareholders.”explains number one the world of storage hardware. CEO David Geeckeler adds that this allows the company to capitalize so that it can implement its future strategic decisions.
Flash memory, growth engine
Elliot pushes for a spin-off of Western Digital’s hard drive business (decline) and flash memory business (growth). As for the latter, the American is partnering with Kioxia (formerly Toshiba Memory Corp) with whom he is co-investing to take the weight off leader Samsung. The joint factories, seven in all, are located in Japan. So it’s going to be about merging flash operations with Kioxia, which Bloomberg thinks will be on the right track. The new organization will be listed on the US stock exchange.
Western Digital tried to buy Kioxia in 2021 in partnership with Micron and then worked on a takeover bid just for the flash memory business. But none of these attempts were successful.
Difficult market
The current context of declining demand for these memory chips, used in smartphones, servers and TVs among others, is driving consolidation. Western Digital, which just released its second fiscal quarter results, posted a loss of $446 million, up from a profit of $564 million a year earlier. Its turnover fell by 36%. At the end of 2022, the world’s largest hard drive manufacturer, US Seagate, announced it would cut 3,000 jobs, or 8% of its workforce.
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