Western Digital Buys Hitachi Global Storage Technologies
Western Digital Corp. announced on Monday that it is paying $4.3 billion in cash and stock to acquire Hitachi Global Storage Technologies.
The deal is one of the largest in an industry that has been consolidating for decades. The deal gives the combined companies about half of the worldwide hard drive market.
Western Digital is giving itself a foothold in the market for drives that go into servers and corporate-level storage arrays.
It is the number 1 hard drive maker, ahead of Seagate Technology PLC in terms of units sold.
Traditional, spinning hard drives are beginning to see serious competition from solid-state flash memory, which are mostly used in tablets and smartphones.
Jayson Noland, an analyst with Robert W. Baird & Co., told the Associated Press that in the 1980s there were as many as 80 hard drive makers.
He said that Hitachi, which is the third largest hard drive maker, had been “a thorn in the side of this industry for a long time in overproducing drives. They’re a part of a bigger company and didn’t seem to care if they lost money.”
Executives from Western Digital and Hitachi went on a conference call with analysts to emphasize the measures they are taking to avoid losing market share because of the combination.
However, Noland told AP that it is likely that Western Digital and Hitachi will lose some customers when the deal closes.
“It’s a good deal, and to be honest, Seagate should send flowers to Western Digital,” he said. “They’re going to be the natural recipient of market share, just because Western Digital did this.”
John Rydning, research director covering hard drives for IDC, said that the deal is “clearly one of the biggest mergers in the history” of the hard disk industry.
He told AP that consolidation has benefited the industry by helping the players who are left become more profitable.
He said that the corporate market “represents one of the most durable growth prospects” for hard disk industry over the next five years.
After the deal closes, Hitachi Ltd. will own about 10 percent of Western Digital. Two of the company’s executives will also join Western Digital’s board.
Hitachi makes an array of products from nuclear power plants to television sets. It bought the disk drive unit from IBM Corp. in 2000.
Both companies’ boards have approved the acquisition, which is expected to close in the third quarter.
Western Digital said it plans to pay for the buyout with existing cash and about $2.5 billion in total debt.
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