Spinning rust will be more profitable than flash as long as a) cost per terabyte is lower and b) there are few players in the market.
For the near term, hard disks simply return higher revenue due to the fact they hold more data at a lower cost, and only 3 companies manufacture them. Meanwhile in the flash space, you have nearly a dozen companies manufacturing flash memory, and hundreds of companies making products that use it, resulting in fierce competition that just doesn't exist between Seagate, WD and Toshiba.
This doesn't bode well for one of those two new divisions. More often than not, this happens when a companies' leadership feels that an unprofitable or under profiting entity is dragging the overall business down with it. They always spin in as restructuring for the sake of competition and blah, blah, blah...
If I had to pick which division is not likely to do well, I'd say HDDs: they're definitely on a downturn overall. Rapidly becoming a niche product used only for slow bulk storage of large quantities of data, mostly in datacenters.
I assume they'll maintain a trademark cross license so SSDs can continue to use the WD name.
You may have thought this (HDD decline) in 2016 which is why investors generally cheered the Sandisk acquisition in the first place even though WD had to remortgage the house to get it. Fast-forward to 7 years later and HDD-focused Seagate (plus a few SSDs it buys NAND for) has wiped the floor with them financially. HDDs are showing a really long tail and the market economics of them seem to be far better than boom-and-bust NAND. WD is just throwing in the towel here, plain and simple.
Makes sense internally to separate the businesses out, but separating them into 2 completely different public companies is very strange. Each public company will need to have their own HR, own accounting, own marketing. You don't see AMD splitting itself into separate FPGA, GPU, CPU, motherboard companies.
Obviously you should report them and run them internally as separate divisions but there's a lot of synergy and this direction can't be explained well.
Splitting the company will allow one of the entity to be sold. Surprisingly the ssd division is not doing as well because of the supply glut in the market resulting in lower nand pricing. Hdd division on the other hand has a shrinking market share which question is sustainability in the future
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Threska - Tuesday, October 31, 2023 - link
Well except for the whole memory downturn making the timing less than ideal.DanNeely - Tuesday, October 31, 2023 - link
It makes it easier for WD executives and smart investors to dump the shares of spinning rust and snap up more flash on the cheap.Samus - Thursday, November 2, 2023 - link
Spinning rust will be more profitable than flash as long as a) cost per terabyte is lower and b) there are few players in the market.For the near term, hard disks simply return higher revenue due to the fact they hold more data at a lower cost, and only 3 companies manufacture them. Meanwhile in the flash space, you have nearly a dozen companies manufacturing flash memory, and hundreds of companies making products that use it, resulting in fierce competition that just doesn't exist between Seagate, WD and Toshiba.
Einy0 - Tuesday, October 31, 2023 - link
This doesn't bode well for one of those two new divisions. More often than not, this happens when a companies' leadership feels that an unprofitable or under profiting entity is dragging the overall business down with it. They always spin in as restructuring for the sake of competition and blah, blah, blah...kepstin - Tuesday, October 31, 2023 - link
If I had to pick which division is not likely to do well, I'd say HDDs: they're definitely on a downturn overall. Rapidly becoming a niche product used only for slow bulk storage of large quantities of data, mostly in datacenters.I assume they'll maintain a trademark cross license so SSDs can continue to use the WD name.
ABR - Thursday, November 2, 2023 - link
You may have thought this (HDD decline) in 2016 which is why investors generally cheered the Sandisk acquisition in the first place even though WD had to remortgage the house to get it. Fast-forward to 7 years later and HDD-focused Seagate (plus a few SSDs it buys NAND for) has wiped the floor with them financially. HDDs are showing a really long tail and the market economics of them seem to be far better than boom-and-bust NAND. WD is just throwing in the towel here, plain and simple.Flunk - Tuesday, October 31, 2023 - link
That is exactly why they do things like this. HDD sales are shrinking and they don't want to weigh the flash business down with it.May I suggest they rename the flash division to Sandisk ;).
deil - Thursday, November 2, 2023 - link
yup. make sure that profitable part will not suffer from it, then dump the ballast.dontlistentome - Wednesday, November 1, 2023 - link
Genius. Get massive bonuses and stock options for merging the flash division (Sandisk). Wait 3 years. Massive bonuses for demerging.webdoctors - Wednesday, November 1, 2023 - link
Makes sense internally to separate the businesses out, but separating them into 2 completely different public companies is very strange. Each public company will need to have their own HR, own accounting, own marketing. You don't see AMD splitting itself into separate FPGA, GPU, CPU, motherboard companies.Obviously you should report them and run them internally as separate divisions but there's a lot of synergy and this direction can't be explained well.
zhiling0229 - Wednesday, November 1, 2023 - link
Splitting the company will allow one of the entity to be sold. Surprisingly the ssd division is not doing as well because of the supply glut in the market resulting in lower nand pricing. Hdd division on the other hand has a shrinking market share which question is sustainability in the futurePeachNCream - Wednesday, November 1, 2023 - link
So WD buys SanDisk in 2015 (source: https://www.anandtech.com/show/9738/western-digita... and now is splitting apart in 2023. Circling the drain, I see.