Western Digital Buys Hitachi for $4.3 Billion

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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)

iSuppli Chart

Source: IHS iSuppli from

Comments

Stephen Swift

This bums me out.  While I don’t have any statistical data to back me up, I’ve always felt Hitachi drives failed less than WD drives did.  Hard to imagine production staying exactly the same when the companies merge.

Bryan Chaffin

I’ll add to that, Stephen, that less competition in this market isn’t going to be all that great for consumers.

Then again, the HDD market is becomingly increasingly less relevant, at least to Apple’s ecosystem, so the impact on those of us using Apple’s devices may be less than what others experience.

Also on the Devil’s Advocate side of things, greater profitability resulting from consolidation may boost R&D in this market.

In the meanwhile, I know people that work for HGST, and I hope the transition is a good one for them.

jameskatt

I’m hoping for lower cost SSDs.  Pretty please.

Of course, they can’t just get ride of Hitachi’s manufacturing plants - and thus Hitachi’s drive designs.  Hitachi/IBM drives will live on - as different models.  The Hitachi name is dead on a hard drive.

The existing and future Hitachi/IBM drives will just be the better drives that WD will have.  Thus I look forward to this since they will then be lower in cost also.

WD 2.5” drives on the top end (e.g. Scorpio Black) are actually faster than Seagate’s top-end hybrid drives.

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