After Toshiba (TOSBF) confirmed that it is considering spinning off its flash memory unit and is considering a cash infusion as part of the move, Citi analyst Stanley Kovler said he does not believe it is feasible for Western Digital (WDC) to fully acquire Toshiba's memory business at this time, given the debt that would be required, but he thinks Western Digital could take a "small, perhaps 20% stake," which he believes could be slightly accretive depending on the structure of a deal. Kovler keeps a Buy rating and $85 price target on Western Digital shares.

Sees Q4 revenue $3.6B-$3.8B, consensus $3.69B.

Reports Q3 GAAP EPS 34c. Reports Q3 revenue $3.46B, consensus $3.36B. "As evidenced by our excellent third quarter results, Western Digital continues improving through-cycle profitability and dampening business cycles by leveraging our strategy of developing a diversified portfolio of industry-leading products across a broad range of end markets," said David Goeckeler, Western Digital CEO. "We are in the early innings of unlocking the full potential of this company, and as industry supply and demand dynamics continue to improve, we will remain disciplined around our capital spending and focused on driving innovation and efficiency across our businesses. We are confident in our strategy and the actions we have taken to-date, which successfully position us to capitalize on the promising growth prospects that lie ahead."

Pre-earnings options volume in Western Digital is 1.4x normal with calls leading puts 7:5. Implied volatility suggests the market is anticipating a move near 6.2%, or $4.32, after results are released. Median move over the past eight quarters is 2.1%.