The Western Digital Corp (NASDAQ: WDC) is a popular alternative to high-priced computer hardware makers such as NVIDIA (NVDA).
Mr. Market likes Western Digital (WDC), the share price rose from $37.03 on 2 November 2020 to $77.17 on 4 June 2021. However, the WDC share price fell to $55.03 on 2 November 2021. In comparison, Mr. Market paid $264.01 a share for NVIDIA (NVDA) on the same day.
So what is Western Digital (NASDAQ: WDC) and why does Mr. Market like it? Western Digital manufactures data storage solutions such as hard drives, portable drives, high-capacity drives, memory cards, cloud alternatives, and flash drives.
The pandemic increased the demand for such solutions by forcing more people to work from home. Many of those people invested in home data storage solutions such as Western Digital’s fast Thunderbolt 3 drive. People need such data storage solutions to back up their work at home.
What is Western Digital?
Western Digital Corp (WDC) manufactures many storage devices. Western Digital’s signature products include Network Attached Storage (NAS) devices.
To elaborate, NAS devices allow families, small businesses, creative professionals, and others to store enormous amounts of data from many devices. For example, NAS’s My Cloud solutions allow every member of a family to use Bluetooth to back up data through Bluetooth on a home cloud.
Western Digital also offers Redundant Array of Independent Disks (RAID) storage systems. A RAID system connects multiple drives to create one fast drive that automatically backs up data in two or more places. Hence, a writer could back her novel up on two or three drives without using cloud storage.
Western Digital Cloud Alternatives
Western Digital cloud alternatives such as the WD My Passport SSD (solid state drive) allow users to back data up fast with keyword enabled hardware encryption. The WD My Passport has a sleek durable metal design. Another solution, the SanDisk iXpand Flash Drive Luxe offers a small drive you can carry in your pocket.
Besides external devices, Western Digital offers color-coded hard disk drives you can install in computers. For example, Western Digital’s WD Red hard drive offers NAS storage you can build into your PC.
Western Digital claims its SanDisk extreme USB devices allow users to read data at speeds of up to 420 megabytes a second. They claim Western Digital’s SanDisk Extreme Pro USB 3.1 USB allows users to store at up to 380 megabytes a second. Smaller Western USB devices include the Cruzer and the Ultra Dual Drive Luxe USB Type-C.
Western Digital for Video and Photography
The Western Digital Thunderbolt 3 can transfer data at speeds eight times faster than USB 3.0 connections. The Thunderbolt 3 uses a versatile USB-C connector. Western Digital claims the Thunderbolt 3 offers transfer speeds of up to 400 gigabytes a second while using less bandwidth. In addition, they claim the Thunderbolt 3 can daisy chain up to three devices through a single USB port and deliver up to 15 watts of electricity for connected devices.
Western Digital claims its SanDisk Ultra memory card can store up to one terabyte of data and operate at speeds of up to 120 megabytes a second and deliver full High Definition video for camcorders and compact cameras. You can use a different version with Full HD action cameras and smartphones.
In contrast, they claim the SanDisk Extreme can store 256 gigabytes of data at speeds of 150 megabytes a second. Hence, the SanDisk Extreme could support 4K Ultra High Definition (UHD) video and photography. Moreover, they claim the SanDisk Extreme Pro can store up to 512 gigabytes at speeds of up to 300 megabytes a second. Hence, they claim the Extreme Pro can support 8K UHD video.
Use cases for these devices include professional and amateur photography, movie making, video, and security.
Western Digital Business Solutions
The Western Digital (WDC) business storage solutions include RISC-V an open source hardware platform. Businesses can use RISC-V to build customized processors for data-centric applications.
Open sourced business solutions from Western Digital include Linux Kernal Zoned Storage, RISC-V SweRV Core, Sweet with public key elliptic curve cryptography (ECC) the Open Titan integration guidelines for silicon root of trust (RoT) chips for the Internet of Things (IoT), and Western Digital on Github. Western Digital works with the RISC-V Foundation, the CHIPS Alliance, the Linux Foundation, and the FOSSI Foundation to create outsourced solutions. Uses for the Open-Sourced solutions could be blockchain, IoT devices, cryptocurrency, and payment systems.
Another open-sourced solution is from Western Digital is Zoned Storage. The hope is that Zoned Storage allows data centers to scale up on many devices. Hence, a small business could use Zoned Storage to build its own mini-data center. They claim Zoned Storage can operate on SSD devices, which offer higher capacities at lower costs.
Western Digital is offering devices for machine learning and artificial intelligence. For example, the U.2 FPGA based card for machine learning inferencing. They claim you can build machine learning networks with seamless deployment with the U.2 FPGA cards. The U.2 FPGA cards also support video transcoding for uses such as facial recognition,
Western Digital is building cutting-edge non-volatile memory to increase the storage capacity of computer processing units. Business data security solutions from Western data include physical root of trust (RoT) chips, with built int security and Open Titan RoT.
Business uses for Western Digital’s Hardware include the IoT, Self-driving vehicles, automotive, transportation, photography, video production, and Telecom.
Can Western Digital Make Money?
The potential market for Western Digital’s data storage is enormous. The U.S. Small Business Administration estimates there were 31.7 million small businesses in the United States in 2020.*
Additionally, Statista estimates 44% of US employees worked remotely for over five days a week after COVID-19. In contrast, only 17% of US employees did remote work for five a days week before the COVID-19 pandemic.
Consequently, 44% of American employees are potential Western Digital (WDC) customers. To elaborate, 44% of American employees could need to establish a home office. Hence, those employees will need data storage systems.
Does Western Digital Make Money?
Western Digital (NASDAQ: WDC) makes some money. Western Digital reported a quarterly gross profit of $1.656 billion and a quarterly gross profit of $675 million on 30 June 2021.
The quarterly gross profit grew from $1.18 billion on 30 June 2020. Similarly, the quarterly operating income grew from $261 million on 30 June 2020. Hence, Western Digital is growing.
Stockrow estimates Western Digital’s revenues grew by 14.77% in the quarter ending on 30 June 2021. Consequently, the quarterly revenues grew from $4.287 billion on 30 June 2020 to $4.920 billion a year later. However, the revenues fell for three straight quarters between 30 September 2020 to 31 March 2021.
Furthermore, Western Digital’s quarterly operating cash flow rose from $172 million on 30 June 2020 to $994 million on 30 June 2021. In addition, the quarterly ending cash flow grew from $105 million on 30 June 2020 to $2.995 billion on 30 September 2020 to $636 million on 30 June 2021. Western Digital can generate cash from its business.
What Value Does Western Digital Offer?
Western Digital (WDC) weathered the pandemic with more cash and less debt. For instance, the cash and short-term investments grew from $3.048 billion on 30 June 2020 to $3.37 billion on 30 June 2021. In comparison, the total debt fell from $9.82 billion to $8.926 billion.
Moreover, Western Digital reported four straight quarters of negative financing cash flows between June 2020 and June 2021. Hence, the company borrowed no money during the COVID-19 downturn.
Finally, Western Digital’s total assets grew from $25.662 billion on 30 June 2020 to $26.132 billion on 30 June 2021. Thus, the company added value during the COVID-19 chaos.
I think Western Digital could be a terrific dividend stock because it paid a 50¢ quarterly dividend on 2 April 2020. However, Western Digital has not paid a dividend since April 2020.