- Seagate and Toshiba are bidding against each other for TDK's magnetic-heads business, a deal that would be multibillion-dollar in size. Seagate shares dropped 12.4% and Western Digital dropped 7% after the report.
- Toshiba outlined plans to increase hard disk drive supply for AI data centers, with capacity ramping by 2027. That raises the prospect of easing HDD tightness and weaker pricing for Seagate and Western Digital.
- Bernstein SocGen Group called the concerns overstated, recommended buying both stocks on weakness, and named Seagate a top pick. TDK and Toshiba denied a decision but did not deny discussions.
- Seagate's operating margin reached 34.7% with contracts securing pricing through calendar 2027, the backdrop that makes the market sensitive to any sign of pricing-power erosion. The selloff also reflected insider selling and a valuation seen as rich versus Seagate's own history.
Quotes
“Bernstein SocGen Group defended both stocks, arguing these concerns are overstated and recommended buying on weakness, naming Seagate as a top pick”
“TDK and Toshiba have denied a decision, they have not denied discussions”
“The most relevant recent data point here is Seagate's jump in operating margin to 34.7%, with management pointing to contracts that secure pricing through calendar 2027.”
“The bigger risk is that this opportunity sits in a notoriously cyclical hardware market, where a pullback in big cloud customer spending or hiccups in rolling out new HAMR-based products could quickly hit volumes, margins, and cash flow”