Hard disk drive (HDD) manufacturer Western Digital Corp. (WDC) recently announced that it will be buying back additional shares worth $1.5 billion as per board authorization. Western Digital (“WD”) will make the repurchase immediately.

The authorization is for a time period of 5 years. The shares will be repurchased from the open market and the amount of purchase will depend on market conditions and corporate considerations.

WD’s intention of buying back shares could not be surmised from the company’s earnings call on April 27, so this must have been a later development. However, the company did mention that it would be making strategic capital investments. In any case, a share repurchase program is good news because it is a way of returning cash to investors rather than stashing it in the hope of future growth opportunities.

The recent momentum in its business has enabled WD to build enough cash balance for the purpose. WD ended the recent financial quarter with a cash balance of $3.37 billion and generated an operating cash of $1.21 billion. Notably, the company did not make any repurchases in the past few quarters.

In a separate development, WD announced that it will now shift its listing from the New York Stock Exchange to NASDAQ. The trading, under the ticker name “WDC,” will begin from June 1, 2012.

WD’s prospects seem bright with the launch of a 2.5 inch HDD suite namely CinemaStar, targeted at audio/video (A/V) and consumer electronics manufacturers. WD expects that the high capacity HDDs will be able to meet the growing demand for next-gen storage devices in the said market.

As a result of strengthening demand from OEMs (original equipment manufacturers), WDC witnessed a solid year-over-year revenue growth of 34.8%, in the last quarter. Moreover, the company’s new product launches at regular intervals are also encouraging.

Coupled with this, the news of share buybacks will stir investor sentiment, in our belief. But keeping in mind the debt burden of $2.51 billion, stiff competition from Seagate Technology plc (STX) and slowing HDD demand due to lackluster PC sales, we prefer to take a neutral stand for now.

Currently, Western Digital has a Zacks #3 Rank, implying a short-term Hold rating.

 
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