Western Digital (WD) announced Monday that it has entered a definitive agreement to buy Hitachi Global Storage Technologies (HGST) — the hard drive and storage business Hitachi itself bought from IBM in 2003 — for US$4.3 billion. The deal will cement WD’s position as the number one global hard drive market with 49.6% of the market, up from 31.4%, according to analysis from IHS iSuppli.
WD said that it was paying $4.5 billion in cash and 25 million WD shares “valued at approximately $750 million” to Hitachi to acquire the business. Hitachi as a whole is a far, far larger company with divisions in electronics, railroads, manufacturing, and other areas.
The combined company will retain the name of Western Digital and continue to be based in Irvine, CA. Hitachi’s operations are located mostly in San Jose, CA. The company has not yet commented on whether there would be any changes in HGST’s operations, but the firm did cite several boilerplate reasons for the acquisition.
“We believe this step will result in several key benefits—enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace,” John Coyne, president and chief executive officer of WD, said in a statement.
IHS iSuppli noted that the impact of Apple’s iPad (and presumably, or at least eventually, other tablets) had resulted in slowing sales of hard disk drives, despite the explosion of such applications as generic digital video recorders and other uses for the devices. According to the firm, one of WD’s biggest benefits in acquiring HGST is entry into the enterprise market, where WD has little presence.
IHS iSuppli Figure: Global Hard Disk Drive (HDD) Market Share Shipment in the Fourth Quarter of 2010
(Percentage of Unit Shipments in Thousands)
Source: IHS iSuppli from