New Data Storage Products Boost Western Digital Stock

Western Digital Corp. shares rose 36% Monday on expectations that sales of new products used to store data on computer networks will boost the Irvine disk-drive maker’s revenue.

The stock moved up $1.88 a share to $7.06 on trading of 18.8 million shares, six times the three-month daily average. Earlier, the shares reached $7.25.

The shares have gained about 69% this year, though they are down by about 25% from a year ago.

Western, the world’s No. 3 maker of disk drives that store programs, databases and Web sites on computers, this month began selling its Connex network attached storage devices for small- to medium-sized businesses. The Connex division could be valued at $700 million to $1 billion, analyst Dane Lewis at Robertson Stephens & Co. said in a report released Monday.

“We believe the Connex division is not reflected in Western Digital’s share price,” wrote Lewis, who raised his rating of the company to a “buy” from “market performer” and projected a 12-month price of $10 for the shares.

Lewis also said Connex’s entry is “well-timed” to participate in the growth of storage appliances.

Driven by digital data in the form of audio and video, the demand for digital storage will increase, Lewis said.

“We foresee new consumer applications, high capacity demanded by traditional hosts driven by Internet and e-commerce applications, streaming video content on the Web and voice-recognition enabled audio files among other things,” he said, adding that demand will lead to better balances between supply and demand for the disk drive industry.

Lewis also said he believes Western Digital’s current cash levels and available sources of cash are sufficient to carry the company until the disk-drive industry improves.

Shares of other disk-drive makers also moved up Monday.

The stock of Milpitas-based Maxtor Corp. rose 88 cents to $12.50. Seagate Technology Inc., the No. 1 disk-drive maker, rose $4.50 to a record $68.75.