Sector Snap: Data Storage Makers Gain

NEW YORK (AP) — Shares of Western Digital Corp. and Seagate Technology rose Tuesday as analysts predicted improving profit margins for the data storage makers.

In research notes Tuesday, UBS initiated coverage of both companies with a "Buy" rating.

UBS analyst Arun Sharma said Western Digital, based in Lake Forest, Calif., has a "leading position in the fastest growing parts of the market," making hard disk drives for notebook computers and external hard drives.

The company's move into the business storage market should help support revenue and margin growth as well, Sharma added.

On Seagate, Sharma said a renewed focus on improving margins and getting its products to market faster as well as opportunities to cut debt should help the company's stock.

In a separate note, Stifel Nicolaus analyst Aaron Rakers reiterated his "Buy" rating on Seagate, saying demand from business customers could drive up gross margin.

Rakers said Seagate's chief financial officer, Patrick O'Malley, agreed in a recent conference call that "server demand data points would appear to be incrementally more positive."

Seagate rose 27 cents, or nearly 2 percent, to $15.35 in afternoon trading, while Western Digital gained $1.23, or 3.5 percent, to $36.44. Earlier in the session, Western Digital shares hit a new 12-month peak of $36.50.