Shares of Western Digital Corp. rallied to eight-year highs Wednesday after two of its biggest competitors said they are joining forces.
The Lake Forest-based disk drive maker’s shares soared as much as 23% to $19 in early morning trading before closing at $18.45, a gain of about 18%.
Prior to the market’s opening, Seagate Technology LLC in Scotts Valley said it planned to buy Maxtor Corp. of Milpitas in a deal worth $1.9 billion.
With Seagate already holding the No. 1 spot in the drive market and Maxtor claiming the No. 4 ranking, the deal would give Seagate a commanding position over No. 2 Western Digital.
But that didn’t bother investors. One analyst said the market was bidding up Western Digital’s shares in hopes that computer makers would shift business away from Seagate to Western Digital,so as not to rely too much on the largest vendor for drives.
“They have the ability to increase market share,” said Christian Schwab, an analyst with Craig-Hallum Capital Group LLC in Minneapolis.
Schwab said it was too early to tell if that would pan out.
According to El Segundo-based iSuppli Corp., Seagate had 30% of the drive market in the second quarter while Western Digital claimed a 17.6% share. Maxtor had 13.5%.
The trading today put Western Digital’s stock at around $4 billion in market value.
