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Western Digital announced today that it has entered into a definitive agreement to acquire Hitachi Global Storage Technologies (GST), the disk drive arm of Hitachi Ltd., in a cash and stock transaction valued at about $4.3 billion.
Western Digital is the leading supplier of hard disk drive technology, with about 31% of the market, followed by Seagate Technology with 29%. Hitachi GST's business represents about 18% of total hard drive units shipped, according to market research firm iSuppli. Once combined, Western Digital and Hitachi GST will handily dominate Seagate in the market.
Seagate declined comment on the impending merger.
The deal would give Western Digital, a company focused mostly on the consumer external hard drive segment, a greater foothold in the data center internal disk drive space.
Under the agreement, Western Digital will pay $3.5 billion in cash and transfer 25 million shares of common stock valued at $750 million. The stock transaction means Hitachi Ltd. will own about 10% of Western Digital shares outstanding. Two representatives of Hitachi GST will be added to Western Digital's board of directors.
In a conference call this morning, Western Digital CEO John Coyne said he expects the deal to close in the September quarter.
"This is a unique development in the 55-year history of the hard drive industry in that it combines the resources of two of the world's most successful and most profitable hard drive companies," he said.
Western Digital and Hitachi are no strangers to disk drive division acquisitions. In 2003, Hitachi bought IBM's hard disk drive unit. However, it has not been able to make a profit on that business in light of what has been a significant drop in hard disk drive prices over the past decade. In 2007, Western Digital bought hard drive technology manufacturer Komag, and in 2009 it purchased solid-state drive manufacturer SiliconSystems.
In the conference call, Coyne acknowledged that history has shown that hard drive manufacturers tend to lose share value in the wake of industry consolidations as systems manufacturers look to "rebalance" their suppliers.
"It is our intent to work very hard now and in the future to deliver superior value to customers so that they will continue to reward us with their business," he said.
The resulting company will remain based in Western Digital's headquarters in Irvine, Calif.
Coyne will remain CEO. Steve Milligan, president and CEO of Hitachi GST, will join Western Digital as president, reporting to Coyne.
"This brings together two industry leaders with consistent track records of strong execution and industry outperformance," Milligan said in a statement. "Together we can provide customers worldwide with the industry's most compelling and diverse set of products and services, from innovative personal storage to solid-state drives for the enterprise."
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Western Digital is the leading supplier of hard disk drive technology, with about 31% of the market, followed by Seagate Technology with 29%. Hitachi GST's business represents about 18% of total hard drive units shipped, according to market research firm iSuppli. Once combined, Western Digital and Hitachi GST will handily dominate Seagate in the market.
Seagate declined comment on the impending merger.
The deal would give Western Digital, a company focused mostly on the consumer external hard drive segment, a greater foothold in the data center internal disk drive space.
Under the agreement, Western Digital will pay $3.5 billion in cash and transfer 25 million shares of common stock valued at $750 million. The stock transaction means Hitachi Ltd. will own about 10% of Western Digital shares outstanding. Two representatives of Hitachi GST will be added to Western Digital's board of directors.
In a conference call this morning, Western Digital CEO John Coyne said he expects the deal to close in the September quarter.
"This is a unique development in the 55-year history of the hard drive industry in that it combines the resources of two of the world's most successful and most profitable hard drive companies," he said.
Western Digital and Hitachi are no strangers to disk drive division acquisitions. In 2003, Hitachi bought IBM's hard disk drive unit. However, it has not been able to make a profit on that business in light of what has been a significant drop in hard disk drive prices over the past decade. In 2007, Western Digital bought hard drive technology manufacturer Komag, and in 2009 it purchased solid-state drive manufacturer SiliconSystems.
In the conference call, Coyne acknowledged that history has shown that hard drive manufacturers tend to lose share value in the wake of industry consolidations as systems manufacturers look to "rebalance" their suppliers.
"It is our intent to work very hard now and in the future to deliver superior value to customers so that they will continue to reward us with their business," he said.
The resulting company will remain based in Western Digital's headquarters in Irvine, Calif.
Coyne will remain CEO. Steve Milligan, president and CEO of Hitachi GST, will join Western Digital as president, reporting to Coyne.
"This brings together two industry leaders with consistent track records of strong execution and industry outperformance," Milligan said in a statement. "Together we can provide customers worldwide with the industry's most compelling and diverse set of products and services, from innovative personal storage to solid-state drives for the enterprise."
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The announcement by Western Digital regarding the acquisition of Hitachi Global Storage Technologies (GST) marks a significant development in the hard drive industry. Here's a breakdown of the key points from the announcement:
Acquisition Details:
- Value: The acquisition is valued at approximately $4.3 billion in a mix of cash and stock transactions.
- Market Share: Western Digital holds 31% of the market share in hard disk drive technology, with Hitachi GST representing about 18% of total hard drive units shipped.
- Impact on Market: Post-merger, Western Digital and Hitachi GST together are expected to surpass Seagate Technology in market dominance.
Transaction Breakdown:
- Payment: Western Digital will pay $3.5 billion in cash and transfer 25 million shares of common stock valued at $750 million to Hitachi Ltd.
- Ownership: Hitachi Ltd. will own approximately 10% of Western Digital shares outstanding post-acquisition.
- Changes in Leadership: Two representatives from Hitachi GST will join Western Digital's board of directors.
- Timeline: The deal is anticipated to close in the September quarter, as stated by Western Digital CEO John Coyne.
Strategic Implications:
- Diversification: The acquisition will enable Western Digital to expand its presence in the data center internal disk drive sector.
- Leadership Continuity: John Coyne will remain the CEO of Western Digital, while Steve Milligan, the current president and CEO of Hitachi GST, will assume the role of president at Western Digital, reporting to Coyne.
Industry Perspective:
- Historical Context: Both Western Digital and Hitachi have experience in acquisitions within the disk drive industry. Hitachi previously acquired IBM's hard disk drive unit, while Western Digital acquired Komag in 2007 and SiliconSystems in 2009.
- Customer Focus: Coyne emphasized the importance of delivering value to customers to ensure ongoing business relationships, given the typical impact on share value post-consolidation in the industry.
Future Prospects:
- Company Headquarters: The resulting entity will continue to operate from Western Digital's headquarters in Irvine, Calif.
- Product Portfolio: The combined company aims to offer a diverse range of products and services, spanning from personal storage solutions to enterprise-grade solid-state drives.
