Western Digital has announced its decision to split its hard disk drive and NAND memory businesses, creating two separate public companies. According to the company, the change is aimed at refining the focus and operational efficiency of each business segment. The separation, planned to be tax-free, is slated for completion in the second half of 2024, subject to necessary approvals and customary conditions.

Western Digital believes that this separation will allow each business unit — hard disk drives and NAND flash memory — to refine their strategic directions, focusing on unique market opportunities and technological innovations. By becoming independent entities, they can operate with enhanced efficiency, each with its own capital structure, allowing for more targeted and agile decision-making processes, according to the company's official rationale. This move is seen as a way to bolster each unit's position in the market, driving long-term success through focused strategies and operational efficiencies.

The decision follows a comprehensive strategic review, where various alternatives were evaluated to enhance organizational value and operational efficiency. As a result, Western Digital's board of directors decided that spinning off the company's flash memory business makes a lot of sense. Meanwhile, the company's announcements does not detail how exactly Western Digital plans to split product lineups and whether the new flash venture will retain all flash-based product lines (e.g. SSDs, flash drives), or will mostly focus on production of NAND memory.

"Our HDD and flash businesses are both well positioned to capitalize on the data storage industry’s significant market dynamics, and as separate companies, each will have the strategic focus and resources to pursue opportunities in their respective markets," said David Goeckeler, CEO of Western Digital. "We have already laid important groundwork by building market-leading portfolios and enhancing the operational efficiency of each business, including the creation of separate flash and HDD product business units and separating operational capabilities over the past several years. Additionally, we now have strong product, operational, and financial leadership in place to execute this plan successfully. Each business is in a solid position to succeed on its own, and the actions we are announcing today will further enable each company to drive long-term success in the years to come."

Western Digital obtained its NAND operations when it acquired SanDisk in 2016. Along with NAND production facilities, Western Digital got rather vast software and flash controller operations, which greatly expanded its market opportunities. Meanwhile, some of those operations were eventually merged, which somewhat reduced the company's abilities to address certain market segment. As a result, the separation is viewed as an important step in enhancing each business's ability to capitalize on market-specific growth opportunities and technological advancements.

Western Digital feels that the timing of the separation is right as industry conditions are improving, and sees it as a crucial move to unlock and enhance shareholder value further. The company remains open to exploring additional strategic opportunities that may arise, aiming to optimize the value of both the HDD and flash investments and assets. These additional strategic opportunities possibly include the acquisition of Kioxia, Western Digital's NAND partner that co-owns the company's flash memory fabs. Meanwhile, SK Hynix, another investor of Kioxia, is against the buyout by Western Digital, reportedly vetoing an offer as recently as last week. A combined Western Digital + Kioxia would form the world's largest maker of NAND flash, making it a formidable rival for the South Korean company.

Source: Western Digital

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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.

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