Western Digital Corporation (NASDAQ:WDC) recently launched My Passport Pro, the world’s first portable Thunderbolt-powered external drive in capacities of 2 and 4 terabytes (TB). Presently, all external drives with capacities in excess of 2TB are not bus-powered and require a separate power input, which restricts their portability. With growing high-definition content, WD intends to capitalize on users’ high storage requirements with the company’s first portable 4TB drives. The company has taken special measures to ensure the reliability and sturdiness of these drives, given that high-capacity drives – especially non solid-state drives – are typically susceptible to shocks and physical damage.  The Western Digital My Passport Pro comes in an aluminum case and is pre-tested for shock, making users less reluctant to travel with the high-capacity drives. Below we take a closer look at the drive and its impact on our $93 price estimate for WDC’s stock, which is about 5% higher than the current market price.
My Passport Pro Dual-Drive
The newly launched My Passport Pro drives connect to laptops via the Thunderbolt port, a port only available in Mac computers and Macbooks. Western Digital claims that the read/write speed of these Thunderbolt-powered drives is 233 MB/s, which is significantly more than Firewire 800 and USB 3.0 connectivity (almost twice as fast as USB 3.0). The company intends to target media and creative professionals with large data needs, who need their data on-the-go. The company listed photographers, videographers, musicians and graphic designers among its targeted customer base. However, since the My Passport Pro is only compatible with Apple (NASDAQ:AAPL) systems, it restricts the customer base to Mac users. The company has priced My Passport Pro at $300 and $430 for 2 and 4TB drives, respectively, which makes them significantly more expensive than WD’s existing drives. For instance, WD’s portable 2TB hard drive with USB 3.0 connectivity is available for $130 on the company’s online store.  We believe that the Thunderbolt-powered dual-drive calls out to only a niche market segment of users who have high-volume data transfer requirements on-the-go, own Macs and are willing to pay the steep price.
As the targeted user base seems relatively limited, we don’t expect My Passport Pro’s sales volumes to be particularly significant relative to the company’s overall volumes. However, taking into account the high prices, these drives could carry healthy margins compared to standard hard drives for PCs and laptops. The company witnessed a strong quarter for its consumer electronics division last quarter, owing to a strong demand for its branded products, and management expects that growth to continue during this calendar year.  Although My Passport Pro drives might not contribute significantly to units shipped in the near term, they should help drive average price per branded unit higher. We expect the company’s consumer electronics revenue per unit to gradually decline through the end of our forecast period. Looking ahead, the company foresees strong demand in this area, which could halt the decline in revenue per unit of branded products. However, even if the average revenue per unit of consumer electronics units were to stabilize at close to present figures till the end of our forecast period, there would only be a 3% upside to our $93 price estimate for the company’s stock, as we believe that most of the growth should come from enterprise and cloud storage in the long term.