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Western Digital (WDC) Unveils Storage Products at OCP 2019

Zacks Equity Research

Western Digital Corporation WDC introduced a plethora of solutions at Open Compute Project (“OCP”) Global Summit 2019 to address the need of storage system that facilitates fast data applications and new technologies. Moreover, the move is anticipated to deliver robust storage solutions to accelerate enterprise applications on cloud platforms.

The company showcased high speed Data Center HDDs and SSDs with 64-layer TLC 3D NAND technology, latest OpenFlex NVMe-over-Fabrics and high-capacity enterprise solutions. These storage devices are expected to enhance overall drive capacity, reliability and performance.

With this move, the company attempts to accelerate the development of emerging data-centric technologies including the likes of secure processing, connected applications, Internet of Things (“IoT”), industrial controls, among others.

Moreover, NVMe interface can optimally integrate with Western Digital’s 3D NAND technology, in turn enhancing storage capabilities. We believe Western Digital’s latest NVMe client architecture and product portfolio will benefit from pent up demand in the storage market.

Per TechNavio, enterprise SSD market is expected to witness a CAGR of 17% during 2016-2020.

Western Digital Corporation Price and Consensus


Western Digital Corporation Price and Consensus | Western Digital Corporation Quote

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 strengthens the overall prospects of the company.

Bottom Line

The new products are aimed at innovating memory technologies further, which in turn will fortify the company’s product portfolio. We believe that the momentum from the launch of the Western Digital product suite will help the company to emerge as a major player in the rapidly growing storage market, in turn lending greater stability to its revenue stream. Additionally, this will help Western Digital gain new customers, going forward.

However, stiff competition from Seagate STX, Hitachi, Samsung and Intel in the storage and pricing pressure add to woes. Customer concentration also remains a headwind. Softness in flash market pricing trends remains a headwind in the near term.

Zacks Rank & Key Picks

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

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

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

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