THERE’S NO SECRET that Western Digital have been on the lookout to buy one of its competitors for quite some time and it has now happened, as the company has made an agreement to acquire Hitachi Global Storage Technologies, also known as HGST. That leaves only four major hard drive manufacturers, Samsung, Seagate, Toshiba and Western Digital.
For one reason or another, most purchases of this kind in the past have ended up at Seagate, anyone remember Conner? The most recent purchase was of course Maxtor (who in turn had bought Quantum six years earlier), a brand that Seagate still uses to some extent. HGST was of course IBM’s old hard drive business, but now we’ll see another brand disappear, as it’s unlikely that Western Digital will keep the brand going for any extent of time.
As for desktop hard drives, we’re now down to three major manufacturers, as Toshiba doesn’t make 3.5-inch hard drives. The bad news in all this is less competitiveness in the market which might in turn lead to higher prices. Samsung isn’t readily available in all markets, but this could potentially open new doors for Samsung if the company plays its cards right. As for Seagate, well, they’re all of a sudden in a much worse situation as well since they’re no longer the marginally larger manufacturer of the two companies.
So how much money did Western Digital spend? Well, it wasn’t pocket change, that’s for sure, as HGST set them back $3.5 billion in cash (of which $2.5 billion will be borrowed cash) plus 25 million WD common shares worth another $750 million according to the stock price on the 4th of March. The good news, at least for Western Digital, is that its stocks have already risen by over $5 a share (or over 17 percent if you prefer) since the announcement which has to be seen as a positive market response.
It will be interesting to see what the long term effect of this purchase will be, as we now have one major player in the hard drive market and three much smaller competitors. One thing is certain though, when it comes to cost per GB (or should that read TB these days?) SSDs won’t be able to compete with the traditional hard disk drive for quite some time, if ever. So for now, all of us are still going to need hard drives for the foreseeable future, at least until some clever scientist or two comes up with something much better at equal or lower cost.S|A
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