S&P Equity Research Upgrades Opinion on Shares of Western Digital to 'Buy' (4-STARS) From 'Hold' (3-STARS)

S&P Equity Research Services has upgraded its opinion on shares of Western Digital (NYSE: WDC; $16.70) to "Buy" (4-STARS out of 5) from "Hold" (3-STARS). Western Digital posted June-quarter EPS of $0.53 vs. $0.19, well above our estimate. Results benefited from favorable tax adjustments. Revenue rose 15%. We are pleased with Western Digital's ongoing expansion into the consumer electronics and mobile markets, as these categories together accounted for over one-third of June-quarter revenue. We have raised our fiscal year 2007 (June) EPS estimate by $0.11 to $1.82 and our 12-month target price by $1 to $24. Given our expectations for favorable industry trends, Western Digital's consistent level of execution, and a seasonal benefit later in calendar 2006, we advise purchase of the shares.

Risks to our recommendation and target price include a greater-than- expected decline in average selling prices, a pickup in channel inventory levels and loss of market share.

Richard Stice-CFA

Computer Storage & Peripherals Equity Analyst

Standard & Poor's Equity Research Services

The analyst quoted above is a Standard & Poor's Equity Analyst. He has no affiliation with any company he covers. He has no ownership interest in any company he covers. Standard & Poor's other affiliates may provide services to the companies that are the subject of this report.

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