Western Digital has completed the purchase of Hitachi’s hard disk drive division for $4.3 billion (£2.65 billion) which could see the end of a price war and will also put Western Digital in a better position in the SSD sector.
Western Digital will pay Hitachi $3.5 billion in cash and hand over 25 million shares, valued at $750 million, for Hitachi Global Storage Technologies (GST). The deal has been approved by the board of directors of both companies and it should be finalised by Q3 of 2011. This deal will see the sector’s number two and three players combine to hold just shy of 50 percent of the market, going on figures from IHS iSuppli from last year. It will put Western Digital in a strong position against its nearest competitor Seagate, which holds 29.4 percent of the market.
The HDD sector is currently facing stiff competition from solid state drives (SSDs) which are becoming more and more popular in tablets as well as in laptops. With their higher speeds, the future is in SSDs and with the purchase of Hitachi GST, Western Digital has taken a step to ensure it will be viable in this area in the coming years. As well as granting Western Digital access to the higher-margin corporate segment of the hard drive market, the deal also grants access to Hitachi GST's solid-state drive offerings. Hitachi had forged a partnership with Intel that allows it access to the chipmaker's NAND flash technology – an edge Western Digital has said it will continue to exploit.
With HDD sales dropping by almost 4 percent in the first quarter of 2011, SSDs and Cloud storage are very real threats to the future of the market and Western Digital will see this deal as a way of safe guarding its future.