The market opened slightly higher and was showing a little momentum as oil came off its highs of the session. There was news that Libyan President Gadhafi was looking to negotiate a deal with rebel forces for his safe departure from the country but those rumors haven’t been confirmed. This gave the bulls some hope the crisis could be resolved but the bears are attacking as the market is now trading well off its highs and is negative territory as we head into the second half of trading.
In Merger & Acquisition (M&A) news, Western Digital (WDC, $33.56, up $3.55) is up over 12% after the company announced it was acquiring Hitachi’s hard-disk drive business for nearly $4.3 billion in cash and stock. Normally, when a company buys out another, the acquiring company’s stock price will head lower but this deal is a little different. Western Digital will pay $3.5 billion in cash but is giving Hitachi 25 million of its shares, or 10%.
We did a big write-up in our Weekly Wrap on Western Digital in mid-January
“As for Western Digital, its HDDs (hard disk drive) are used in desktop computers, notebook computers, enterprise storage products, servers, workstations, video surveillance equipment, networking products, digital video recorders, satellite and cable set-top boxes, and external storage appliances. It also offers hard drives as stand-alone storage products for personal data backup. The iMac uses its HDD. And Mac sales are projected to double. The company also makes SSDs (solid state drives).
Although HDDs may eventually get replaced by SSDs, that won’t happen for at least several years. SSDs are primarily used in small devices such as the iPhone, iPod, and iPad. The Macbook Air is currently one of the few laptops using SSDs. Other laptops and desktops still use HDDs. Price for HDDs is still cheaper than SSDs of the equivalent memory and storage. And that will stay that way for some time with prices for both dropping. Storage demand is expected to stay strong with the increasing need for servers to store all the content being shared or steamed over the internet. PC demand is also expected to grow, too.
The technical picture also shows that a strong move upward may be developing.” (END)
The deal will give Western Digital’s a market share of 50% for HDD’s and pad its lead as top dog. Seagate Technologies (STX, $13.85, up $1.41) is second and has 30% covered, so, in essence, these two companies will own over three-quarters of the market pie. Don’t be surprised if some anti-trust issues pop-up.
As we head to press, the Dow is lower by 78 points to 12,091 while the S&P 500 is off by 12 points to 1,309. The Nasdaq is showing the most weakness and is down 49 points to 2,735.