Western Digital (WDC) took a hit today regarding the JV sale with Toshiba.
I am ambivalent about the purchase by WDC. On one hand, getting more into the solid state drive space is the strategic direction to make, but the amount of leverage that WDC will have to assume to complete the purchase of the JV will be very high. This could have long range financial repercussions on WDC's financial health - especially in a cyclical industry!
WDC has been incrementally moving more toward the solid state drive format over the years. The acquisition of San Disk was clearly the correct strategic move.
I like WDC's approach to incrementally moving into the solid state drive (SSD) space. Everyone knows that SSD's are faster than disk configurations, but the SSD costs had to decrease before there would be more wide acceptance of the format. We are now moving much more closely to a more economically palatable cost of SSD's.
One thing is for sure. Companies will now much more closely scrutinize their JV agreements in the future.
