Shares of Lake Forest-based Western Digital Corp. got dinged again Friday following a critical note from Merrill Lynch & Co.
Checks of buyers and resellers of computer disk drives indicate a price war for the computer components, Merrill said.
The investment bank said the average selling price for desktop drives fell
5% to 10% in the past week, led by Seagate Technology.
“We believe that Seagate has dropped its prices the most, as its channel
price vs. (original equipment manufacturer) price spread was the
largest,” Merrill said in the note. “We understand Maxtor and Western
Digital are reacting to Seagate’s move.”
This is the second time this week Western Digital has been the subject of a
critical note from Wall Street.
Piper Jaffray & Co.’s Leslie P. Santiago earlier cut his recommendation on Western Digital to “market perform” from “outperform.”
Santiago said he did so because Western Digital’s shares are nearing his
price target of $16.
“Although we still believe demand for Western Digital’s products more than
justifies its current valuation and recent outperformance, we see hurdles to
continued outperformance going forward,” Santago wrote in a research note.
The disk drive maker could face higher operating expenses as it attempts to
keep pace with Seagate, Santiago said.
Western Digital shares were down 7.3% to $13.34 in late trading Friday.
