HIT Hitachi, Ltd. Common Stock

Hard disk drive (HDD) manufacturer Western Digital Corp. (WDC) appears to have returned to growth. Having completed the long-awaited acquisition of Hitachi Ltd.’s (HIT) storage business last month, the drive maker has now introduced the latest version of its HDD offerings.

Last week, Western Digital announced the shipment of a new 7mm, 2.5 inch mobile hard drive, Scorpio Blue. The new model is expected to woo Notebook and Ultrabook users with its single-platter, shock-proof, soundless, energy-saving, data-protective and longer-lifetime features. The new device will also remain compatible with all mobile computing systems.

Western Digital’s Scorpio Blue will be available in 500GB and 350GB capacities, at $99.99 and $79.99, respectively, and will carry a two-year warranty. Though the company is quite positive about product adoption, we fear that it may have to fight over price or market share with the existing players. This is because 7mm drives from archrivals Seagate Technology plc (STX) and Hitachi offering similar features have already created their own markets.

Apart from this, Western Digital introduced a portable HDD, My Passport Studio, targeting Apple Inc’s (AAPL) MacBook users. The HDD will be available in 2 terabyte capacity (1 terabyte = 1000 gigabyte) at $299.99. Also, a 4 terabyte enterprise-class HDD was introduced by the company’s newly acquired storage unit (Hitachi Global Storage Technology).

During its second quarter, management stated that the company would recover from the adverse effect of the Thailand flood and return to normal operations in a quarter or two. We believe that Western Digital’s recent product offerings will help it in this endeavor.

As per a recent forecast by U.S. market research firm IDC, HDD revenues would grow at a 5-year CAGR (2011–2016) of 8.6%. We think that leveraging Hitachi Global’s technology and business exposure, the company could capitalize on the opportunity.

Currently, Western Digital has a Zacks #1 Rank, implying a short-term Strong Buy rating.

 
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