Western Digital Fortunes Continue on News of Split

IRVINE — Capping a week of good news for its investors, the stock of disk drive maker Western Digital Inc. soared $6.25 a share to close at $70.50 Friday on word of a 2-for-1 split in June.

The company’s stock price rose by $15.375 on the New York Stock Exchange for the week, a gain of nearly 28%, as investors heard nothing but good words about Irvine-based Western Digital and the disk drive industry overall.

A stock split generally signals a company’s optimism about its future and its desire to make its stock more accessible by lowering the average price per share. When times and tempers are good, a split often results in each new share being worth more than half the price of the old shares--a bonus for investors.

In Western Digital’s case, the split, which is to be payable on or near June 3, will apply to investors who buy their stock no later than May 20.

The rush to get in on the deal, analysts said, is what helped push the share price up by 9.7% Friday.

Also helping was an overall good market day for technology stocks and an upbeat report by a Merrill Lynch analyst on networking systems maker Cisco Systems Inc., said Paul Fox, an industry analyst with Montgomery Securities in San Francisco.

There had been speculation that the Menlo Park-based Cisco’s third-quarter earnings would reveal a weakness in the networking products industry, but the Merrill report and others now suggest that the company will meet expectations. That’s good for Western Digital because Cisco and other networking products companies rely on disk drives made by the Irvine firm and its competitors.

Additionally, Western Digital competitor Quantum Corp. released its fiscal 1997 earnings on Wednesday and surprised analysts with stronger-than-expected results.

The ripple effect from that added almost $3 to Western Digital’s stock price on Thursday.

The week started with a bang when Western Digital Chairman Charles Haggerty delivered an upbeat talk to analysts and investors at the influential Hambrecht & Quist Technology Conference in San Francisco.

“We’re seeing strong demand” from all channels, Haggerty said Monday. He told the conference he is he is comfortable with analysts’ estimates that his company will earn $5.71 a share for the fiscal year ending in June, nearly triple the $2.01 a share it earned in its last fiscal year.

“There has been a lot of worry that the computer market is weakening,” Haggerty said Friday. “I think that we have dispelled a lot of that worry this week.”

Adding to the appeal of Western Digital’s stock is a month-old plan by directors to buy back up to 5 million shares. Reducing the number of shares being traded on the open market usually boosts the value of those that remain.

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Fast Track

Western Digital’s stock has jumped 28% in five days, soaring 10% on Friday to close at $70.50. Daily closing prices:

April 25: $55.13

May 1: $70.50

Source: Bloomberg News