Playing hardball
The hard disk drive (HDD) industry is about to go through possible its final round of consolidation following the announcement that Western Digital is going to buy Hitachi Global Storage Technologies for a cool $4.3 billion, of which $2.5 billion will be new debt.
This will leave two specialist disk giants - WD and Seagate - and two other tech giants - Samsung and Toshiba - as pretty much the only remaining hard drive makers. Hitachi GST was itself formed from IBM's disk division, while Seagate acquired Maxtor back in 2006 and Tosh bought Fujitsu's HDD business in 2009.
"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," said John Coyne, president and CEO of WD.
"This brings together two industry leaders with consistent track records of strong execution and industry outperformance," said Steve Milligan, president and CEO of Hitachi GST. "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."
The press release is the usual stuff about how well the two companies complement each other and how great everything's going to be. Given how commoditised the HDD market is, it stands to reason that it will consolidate as economies of scale become key competitive factors. Hitachi GST is also pretty well positioned in the enterprise space, with storage virtualisation a strength.
But this should be the end of the consolidation in the HDD market. All the remaining players are probably too big to be bought by any other others, and now that we're down to four major players the competition authorities will take a very long look at any further consolidation. Having said that, the presence of the other three should allow this acquision to avoid any blockage.
