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Western Digital Rises on Buyout Buzz

The stock moves higher on rumors of a bid by Seagate.
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Shares of hard-drive maker

Western Digital

(WDC) - Get Western Digital Corporation Report

were strongly moving higher, fueled by rumors that it may be purchased by rival


(STX) - Get Seagate Technology Holdings PLC Report

In recent trading Wednesday, Western Digital was up $1.28, or 7.5%, to $18.25, while Seagate, buoyed by a favorable note on industry conditions, was gaining 60 cents, or 2.7%, to $23.09 a share.

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One buy-side analyst with positions in both stocks said there has been chatter indicating that Seagate, which completed the $1.9 billion takeover of Maxtor earlier this year, was considering a buyout of Western Digital, its last major U.S.-based rival. The analyst, who asked not to be named, said he would be surprised if Seagate was ready to make another purchase while it is still digesting Maxtor.

Moreover, the deal would likely raise antitrust concerns.

Separately, A.G. Edwards analyst Aaron Rakers, in a note to clients, wrote that he believed



is on track to meet or beat September-quarter revenue expectations. EMC does not release the names of its suppliers but is known to buy drives from Seagate. A good quarter for EMC implies that it will not cut back orders for components, which is good news for upstream companies.

Rakers was generally positive on the entire storage sector, saying, "demand has tracked in-line, if not a bit better, than typical seasonal trends." His company does not have an investment banking relationship with EMC.

EMC, which gained 2.5% on Tuesday when Rakers published his note, was up another 1.5% to $11.90 on Wednesday. The company will report quarterly earnings before the market opens on Oct. 17.