Western Digital this morning announced plans to purchase Hitachi’s hard disk wing - Hitachi Global Storage - in its entirety, integrating the company into its existing operation.
The deal is set to cost Western Digital the princely sum of $4.3 billion, which will be made up of $3.5 billion in cash and around $750 million in Western Digital shares.
The agreement will create one of the largest hard disk manufacturers in the world, and Western Digital describes the move as ‘a unique opportunity to create further value for our customers, stockholders, employees and suppliers.
Those at Western Digital HQ aren’t likely to crack open the Champagne just yet, though, as the deal is still yet to gain regulatory approval, which could be a hurdle for a deal as large as this.
Western Digital has to borrow heavily in order to finance the purchase, with a loan of $2.5 billion helping to pay for the cash portion of the transaction. The company is remaining bullish about the strategic value of the deal, though, claiming that the acquisition should start immediately adding to its bottom line and earnings per share.
The deal is likely to result in Hitachi hard disks completely disappearing from the shelves, but the company will still have a finger in the hard disk market due to the 10 per cent stake in Western Digital it’s picking up as a part of the deal. The deal will also see Hitachi placing two representatives on the Western Digital board of directors.
This move will effectively only leave four independent hard disk manufacturers in the industry, as Hitachi GST was originally IBM's hard disk division before it was sold to Hitachi, and Seagate bought out Maxtor in 2006. Not only that, but Toshiba also bought Fujitsu's hard drive division in 2009. This leaves us with just Western Digital, Seagate, Samsung and Toshiba.
Is consolidation in the hard disk market a sign that SSDs are starting to take over, or just a sign of capitalism at work? Let us know your thoughts in the forums