Western Digital forced to sell Hitachi assets

Western Digital forced to sell Hitachi assets

Western Digital will be forced to sell desktop drive assets to Toshiba by the FTC, following a ruling that its deal to acquire Hitachi GST was anticompetitive.

Western Digital's hopes of turning the hard drive industry into a duopoly have been dashed as the US Federal Trade Commission demands it sells its desktop hard drive manufacturing facilities to a competitor.

Western Digital had previously hoped to purchase Hitachi Global Storage Technologies, manufacturer of previously IBM-made hard drives, in a deal valued at $4.5 billion. While the FTC is allowing the deal to go ahead, it has a major caveat attached.

The revised terms of the acquisition require Western Digital to sell selected Hitachi desktop hard drive-related sales and manufacturing assets to rival Toshiba within 15 days of the acquisition.

That's a surprising proviso: as the FTC itself admits, Toshiba doesn't currently compete with either Western Digital or Hitachi GST in the desktop hard drive market. It does, however, produce a small number of drives for the mobile and embedded markets. As a result, the FTC claims, it has the experience required to become a third player in what would otherwise have been a duopoly controlled by Western Digital and rival Seagate.

The original terms of the acquisition have been ruled by the FTC as anticompetitive, violating Section 5 of the FTC Act and Section 7 of the Clayton Act by deliberately reducing competition in the marketplace. By positioning Toshiba as a third entry in the market, the FTC hopes competition will not be harmed.

'Protecting competition in the high-tech marketplace is a high priority for the FTC,' claimed Bureau of Competition director Richard Feinstein in a statement to press. 'This order will ensure that vigorous competition continues in the worldwide market for desktop hard disk drives, and that consumers are not faced with higher prices or reduced innovation as a result of this deal.'

As a result of the order, Toshiba will receive all the production and sales assets required to take Hitachi GST's place in the desktop hard drive market with a market share of around 18 per cent. Additionally, Western Digital will be forced to provide the company with access to its employees involved in research & development and production of desktop hard drives, as well as to licence all intellectual property required under fair and non-discriminatory terms. Finally, Western Digital will also be required to sell components to Toshiba until such a time as it can begin manufacturing its own.

Separate to the FTC-mandated deal Western Digital has also agreed to purchase Toshiba Storage Device Thailand, a subsidiary responsible for hard drive manufacturing that was badly hit by the recent floods in the country.


Discuss in the forums Reply
Jack_Pepsi 6th March 2012, 13:04 Quote
Hmmm... interesting.
B1GBUD 6th March 2012, 13:11 Quote
Does this mean they'll be switching to a Japanese Plant to make drives or will they still keep the existing operations going in Thailand? How will this affect current HDD prices?
LordLuciendar 6th March 2012, 13:19 Quote
This is ridiculous... I'm a big fan of Hitachi GST, which has gone through some rough waters these past few years... finally Hitachi was being rescued by Western Digital and the FTC comes along and ruins it all. With Hitachi being split, WD is going to have to assimilate it's technologies into it's name and the Hitachi name will be gone forever. Gone will be a drive company that continued to innovate, and yet usually had some of the lowest prices on the market.
NethLyn 6th March 2012, 13:24 Quote
Agreed it's ridiculous, as I'm a big fan of WD by themselves but it seems if you don't have Microsoft and Intel money then you're fair game for Government interference. They couldn't even leave the ruling to late summer when the supply chain *might* have been getting back to pre Thai flood levels, having Toshiba get a division that it hadn't bothered with recently is hardly going to spell bargain prices.

[EDIT] and it also creates another Samsung to Seagate scenario where anyone with an existing Hitachi drive from any source including inside Panasonic TV Recorders, will now have to start running around checking on who's going to provide their warranty from the first day of this deal. Regulators never stop to consider longer-term consequences like that.
Gareth Halfacree 6th March 2012, 13:37 Quote
Originally Posted by LordLuciendar
With Hitachi being split, WD is going to have to assimilate it's technologies into it's name and the Hitachi name will be gone forever.
The Hitachi name left the building months ago: when Hitachi proper decided it wanted out of the hard drive game, it renamed Hitachi GST to Viviti Technologies. 'Course, we kind of ignore that because everyone knows who Hitachi GST is, but nobody's heard of Viviti.
azazel1024 6th March 2012, 14:54 Quote
But they do stop to consider long term consequences of what it means to have only two hard drive manufacturers in the market, which more likely than not WOULD be bad in the long term.
wsmccusker 6th March 2012, 15:28 Quote
From what I gleaned from the article, they are allowing WD to buy Hitachi on the condition that they sell most of it to toshiba. Is it just me or is that almost completely pointless. Also having to provide access to R&D does that mean WD's own R&D too or just the R&D already carried out by Hitachi?
Harlequin 6th March 2012, 15:58 Quote
WD will walk away fro hitachi and let teh company die - and why the heck is a USA company ruling on a japanese take over anyway??
NethLyn 6th March 2012, 16:00 Quote
Didn't even occur to me that they could just walk away from whatever they spent on the deal and save nearly five billion bucks instead, but it'll probably go to a shareholder vote.
faugusztin 6th March 2012, 16:37 Quote
How is this different from EU requirements for this trade ? AFAIK will sell the 3.5" part of Hitachi to Toshiba and keeps the 2.5" part for himself. This will create a 3rd 3.5" drive manufacturer.

Even this way, it is still worth to do it for WDC because of the 2.5" tech & patents.
SpAceman 6th March 2012, 20:54 Quote
Brilliant decision if you think about it. WD already has heaps of experience in desktop HDDs. Buying Hitachi will increase their knowledge and market share while reducing competition. Competition is good for developing technology. Toshiba obviously don't have the resources or knowledge to start producing 3.5" HDDs competitively but if they were able to obtain pre-existing research and other resources they could actually bring something worth looking at to the market. WD still get all the benefits from the purchase except for reduced competition.
Log in

You are not logged in, please login with your forum account below. If you don't already have an account please register to start contributing.

Discuss in the forums