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Western Digital to Expand Flash Portfolio With WekaIO Tie Up

Zacks Equity Research

Western Digital Corporation WDC recently announced collaboration with WekaIO in an effort to develop joint solution to offer high-performance cost-effective NVMe-based flash storage platform.

WekaIO’s flagship Matrix software will be integrated with Western Digital’s ActiveScale object storage offering and NVMe platform portfolio. This combination is expected to deliver robust storage solutions to accelerate enterprise applications on cloud platforms.

Reportedly, Matrix software offers “the world’s fastest parallel file system”, which strengthens the prospects of the alliance. Together with Western Digital’s low-latency and high-performance NVMe platforms, the collaboration is well poised to deliver scalable and durable cloud storage solutions.

Further, the companies aspire to provide cloud object storage solution with petabyte capacity to accelerate high performance computing (HPC) and machine learning (ML) processes.

Notably, Western Digital Capital, the company’s investment arm, has made an investment in WekaIO for the project. The amount has been kept under wraps.

We believe new initiatives to enhance its data center storage portfolio are likely to aid the company in reviving its fortunes and improve its competitive position against other storage players in the market. Notably, shares of Western Digital have returned 17.1% in the past three months, outperforming the industry’s rally of 11.8%.

Analyzing Market Opportunities

IDC forecasts that by 2025, the global datasphere will grow to 175 zettabytes (that is a trillion gigabytes), from 33 zettabytes in 2018. This exponential growth of data bodes well for Western Digital’s enterprise storage solutions due to growing demand for faster processing of data.

Per ResearchAndMarkets data, the global data center storage market is projected to increase at a CAGR of 11.8% from 2018 through 2022. Per MarketsandMarkets report, the non-volatile memory market is projected to witness a CAGR of 9.5% to reach approximately $82 billion by 2022.

The aforementioned reports reflect robust demand for NVMe cloud storage systems in data centers, which in turn strengthen the prospects of the to-be-developed collaborative solution.

To Conclude

Western Digital has not been doing well financially, of late. Uncertain macroeconomic environment, declining trend in PC shipments and softness in NAND flash pricing trends are adversely impacting financial results. Ballooning debt levels add to the woes.

In second-quarter fiscal 2019, Data center devices and solutions segment revenues plummeted 25.1% year over year to $1.074 billion, owing to weakness in end-market. Moreover, the figure was down 25.7% sequentially.

Western Digital Corporation Revenue (Quarterly)


Western Digital Corporation Revenue (Quarterly) | Western Digital Corporation Quote

The new collaboration on data center storage is anticipated to perk up adoption rate of company’s NVMe solutions, consequently aiding top-line performance in the longer haul.

Zacks Rank & Stocks to Consider

Western Digital currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector are Cadence Design Systems, Inc CDNS, Synopsys, Inc. SNPS and Symantec Corporation SYMC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cadence Design, Synopsys and Symantec have a long-term earnings growth rate of 12%, 10% and 7.9%, respectively.

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