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Sensing the opportunity for growth, Western Digital Corp. (WDC - Analyst Report) has made a strategic investment in Skyera Inc. The capital arm of Western Digital, namely Western Digital Capital has co-invested $51 million to extend its strategic relationship with Skyera. The companies have come together for joint technology development.

We believe that the basic motive behind this strategic investment is to enhance storage technologies, which will enable end-users to develop better storage solutions that are needed to improve the company’s database management skills.

Skyera’s most updated version of the 19/20nm solid-state technology, which can replace the traditional enterprise hard disk systems, appears most attractive for WDC. Moreover, Skyera offers this product at a competitive price of $3 per gigabyte.

In Feb 2013, the technology research firm “TechNavio” re-evaluated their growth expectation for the storage market. The firm expects the Global Storage Resource Management market to grow at a CAGR of 6.32% through 2012-2016.

The key factor fueling the growth of this industry includes noticeable growth in enterprise data volume. The Global Storage Resource Management market has taken the help of cloud storage solutions as well. On the other hand, efficient cost management remains a challenge for this industry.

Again, competition between companies like Seagate Technology (STX - Analyst Report), NetApp Inc. (NTAP - Snapshot Report) and EMC Corporation (EMC - Analyst Report) is expected to put some pressure on pricing of the products. Each company is coming up with new marketing strategies to capitalize on this line of business.

Furthermore, the softness in PC demand has affected the data storage industry. Although the company has been able to handle competition efficiently, bigger players like Fujitsu Ltd., Samsung and Toshiba pose challenges.

To combat this ever growing competition, companies like Western Digital have adopted a diversification strategy. WDC has rolled out a host of hardware and software solutions, which are particularly designed to make storage easier and more readily available.

Additionally, we believe that the acquisition of Viviti Technologies (formerly Hitachi GST) has strengthened WDC’s foothold in the data storage business. We believe that it will take a few more quarters for the company to witness noticeable growth.

Currently, Western Digital has a Zacks Rank #3 (Hold).

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