Western Digital Corp., the maker of hard drives and home-entertainment devices, reached its highest in more than 15 years on speculation the company may go private following the potential buyout of Dell Inc. (DELL:US)
Western Digital, based in Irvine, California, advanced 5.7 percent to $47.36 at the close in New York, the biggest gain since Dec. 5 and the highest closing price since September 1997.
Dell, the Round Rock, Texas-based personal computer maker, is in talks to go private, Bloomberg News reported last week, citing people with knowledge of the situation. Funding from Microsoft Corp. (MSFT:US) may help clinch the buyout by Silver Lake Management LLC, people said today. If that deal moves forward, Western Digital would also be a takeout candidate, said Mark Miller, an analyst at Noble Financial Capital Markets.
“Western Digital could follow,” Miller, a former research manager at Western Digital, said in a telephone interview.
Steve Shattuck, a spokesman for Western Digital, declined to comment.
As a private company, Western Digital wouldn’t have to respond to public shareholder demands and could increase its cash flow, Miller said.
“Its cash flows could be $4 billion to $5 billion a year in a few years,” Miller said.
The company generated $3.65 billion in cash from operations in the past four quarters, according to data compiled by Bloomberg.
Investor sentiment on Western Digital has also turned positive after Seagate Technology Plc (STX:US) recently raised its sales forecast, Miller said. Seagate, based in Dublin, Ireland, rose 7.1 percent to $37.89, its highest close since December 2002.
“Things are not as bad as people thought,” he said.
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