Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) jumped 7.2% in the pre-market session after a report that the company is stepping up merger talks with Kioxia Holdings Corp. According to the report, the deal would give Kioxia a 43% stake in the merged entity, with Western Digital holding a 37% stake and the rest going to existing shareholders. Kioxia recently put its IPO plans on hold due to the weak flash-memory market. The memory chip market is in a tough spot as flash memory prices plummet and demand fails to pick up amid bloated inventories.
What is the market telling us:
Western Digital's shares are somewhat volatile and over the last year have had 22 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was six days ago, when the company dropped 5.53% on the news that the company reported third-quarter earnings results that surpassed analysts' revenue and earnings per share estimates. However, the performance was not all positive, as free cash flow missed, gross margin deteriorated, and inventory levels rose. Revenue guidance for the next quarter also came in below analysts' estimates. It was a mixed quarter for the company, with the results highlighting similar challenges that some semiconductor companies have encountered this earnings season.
Western Digital is up 14.4% since the beginning of the year, but at $35.91 per share it is still trading 42.3% below its 52-week high of $62.25 from May 2022. Investors who bought $1,000 worth of Western Digital's shares 5 years ago would now be looking at an investment worth $433.
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