April 19, 2011
Seagate To Buy Samsung’s HDD Unit
Seagate Technology's $1.4 billion acquisition of Samsung Electronics Co.'s hard disk drive (HDD) business pits it head-to-head with Western Digital Corp. in an industry that has been dogged by price wars.
Samsung's HDD division faces a longer-term threat from wireless tablet devices like Apple's iPad, which uses solid-state drives (SSD).Seagate and Western Digital have been struggling to adapt to a future where fewer consumers have laptops and use devices that are equipped with SSD drives instead.
Western Digital recently made the move to buy the hard disk drive unit of Hitachi Ltd for $4.3 billion.
Rodman and Renshaw analyst Ashok Kumar said that Samsung's HDD business will increase Seagate's market share to 40 percent, while Western Digital and Hitachi will have about half the market.
"Hard disk drive is a commodity business. It's very hard to make money if rivals try to undercut each other," Wedbush Securities analyst Kaushik Roy told Reuters, noting there should be fewer price wars with only three players left standing.
Seagate and Samsung said on Tuesday that they also agreed to extend their patent cross-licensing agreement and co-develop business data storage products.
Samsung agreed to supply Seagate with chips for its hard drives, while Seagate will supply disk drives for Samsung's PCs, notebook computers and consumer electronics.
A Samsung executive will also be nominated to join Seagate's board.
Steve Luczo, Seagate's chairman, president and CEO, said in a statement that the company expects to deliver a broader range of storage technologies to its customers thanks to the Samsung deal.
The companies expect to close the transaction by the end of the year.
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