[CONFIRMED] Seagate buys Samsung's disk drive business


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Who needs competition? Erm... I think we do.

 

http://www.theregister.co.uk/2011/04/18/seagate_buying_samsung_hdd_biz/

 

"

And then there were three

 

By Chris Mellor

 

Posted in Storage, 18th April 2011 09:04 GMT

 

Seagate may buy Samsung's hard disk drive business, according to the Wall Street Journal [1].

 

Samsung wants as much as $1.5bn for the loss-making unit but may take less than $1bn. We understand Seagate chairman and CEO Stephen Luczo is spending up to three months in the Far East, convenient for talking to Korea-based Samsung.

 

With Western Digital buying Hitachi GST [2], Hitachi's hard disk drive (HDD) business, and thereby gaining an an approximate 50 per cent market share by revenue, Seagate lost its leadership position, having a roughly 30 per cent share. A purchase of Samsung would send this towards 40 per cent.

 

The hard disk drive industry would then be divided between Western Digital, Seagate and Toshiba, which has an approximate ten per cent share.

 

Samsung manufactures 3.5-inch EcoGreen and Spinpoint drives with capacities up to 2TB. It does not yet have a 3TB offering. It is also present in the 2.5-inch sector with Spinpoint and S3 Portable up to 640GB capacity. Were Seagate to buy the Samsung HDD business it is likely these brands would be transitioned to the equivalent Seagate brands.

 

The HDD business is a volume manufacturing game and Samsung's volume is too low for it to make serious money from spinning platters. Seagate indicated in a recent preliminary earnings statement [3] it might be considering initiatives of this kind.

 

There is only one potential purchaser other than Seagate and that is Toshiba, which has no 3.5-inch drives in its portfolio.

 

Could Toshiba be considering an exit from the HDD business as well? That's a fascinating possibility and would, if Seagate bought the operation, produce two nearly equally-matched manufacturers, Seagate and Western Digital, both with around half of the HDD market. ®"

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Frankly, the Hitachi WD deal should not have been allowed.

 

Help me understand why?

 

I don't honestly have a reason "why", it is just a gut feeling.

 

If this goes through, how many HD manufacturers do we end up with.  WD, Seagate, ...

 

I can understand that,

I don't like loosing choices either.

The older Samsung 1TB 7200 RPM drives were amoung the fastest I've used.

 

 

I have to think, if part of a business is not profitable.

Should the company be operating at a loss?

Should the company just close down that production?

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I don't think the government should have stopped it (the WD purchase of Hitachi hard drive division), but I don't think it is good news for consumers.

 

I feel that same way about Seagate buying Samsung - not good for consumers.

 

With two players we'll have a duoploly.  All too often there is a long stalemate and prolonged status quo, while the two vendors enjoy relatively high profits.

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I understand everyone's concern, but I can't say I'm terribly bothered by this.  While we may be losing choices in HDDs, don't forget about the burgeoning SSD market.  Newegg currently lists 15 manufacturers for SATA II SSDs, and 4 for SATA III SSDs.  While the price per GB currently can't compete with HDDs, this won't be the case forever.  I expect that within 5 years (at most) we'll all be replacing our slow, hot, power-hungry HDDs with SSDs of equal or greater size.

 

The other fringe benefit is that we'll have to spend less time explaining to new users which HDDs they should buy if there are only 2 choices...

 

Always look on the bright...side...of life...

 

On a side note, I wouldn't miss Toshiba drives at all - those drives fail more than any other brand I've seen.

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A downside I see.

If one manufacture has a serious production flaw, it could create some interesting market conditions while people flood to the other vendor.

 

Who says that they have to "have" a serious flaw... even a rumor of such, or whisper of a bad firmware, and with only two choices, one company could tank. I think back to the stock sell offs of some companies. A rumor that their earnings might only by 14% versus the "16%" guestimated by some analyst and the stock plunges...  ???

 

Shawn

 

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Confirmed:

 

http://www.engadget.com/2011/04/19/samsung-sells-hdd-division-to-seagate-for-1-375-billion/

 

"

Samsung sells HDD division to Seagate for $1.375 billion

 

By Vlad Savov posted Apr 19th 2011 5:04AM

 

Breaking News

 

We're firmly of the belief that SSDs are our future and Samsung would seem to agree. The Korean electronics giant has just announced that it's selling its hard disk drive-manufacturing arm to Seagate Technology for a neat $1.375 billion in equal measures of cash and stocks. As a result, Samsung Electronics will own approximately 9.6 percent of Seagate and get to nominate one new member to join Seagate's Board of Directors, while the two companies have further agreed to deepen their strategic relationship with related cross-licensing and supply stipulations. Samsung will provision Seagate's solid state drives with NAND flash memory, whereas Seagate will furnish Samsung's PCs and consumer electronics products with hard disk storage. The deal is expected to complete in full by year's end and you can read all about it in Seagate's press release after the break.

 

[Thanks, Pavel]

 

PRESS RELEASE

 

Seagate and Samsung Announce Broad Strategic Alignment

 

Samsung to Combine Hard Disk Drive Operations into Seagate

 

Companies to Enter Into Extensive Supply and Cross-Licensing Agreements

 

Samsung to Receive Significant Equity Ownership in Seagate

 

SCOTTS VALLEY, Calif. - April 19, 2011 - Seagate Technology plc (NASDAQ: STX), the world leader in hard disk drives and storage solutions, and Samsung Electronics Co., Ltd., a world leader in digital consumer electronics and information technology, today announced that they have entered into a definitive agreement under which Seagate and Samsung will significantly expand and strengthen their strategic relationship by further aligning their respective ownership, investments and key technologies. Major elements of the agreement include:

 

Samsung combining its hard disk drive (HDD) operations into Seagate

 

Extending and enhancing the existing patent cross-license agreement between the companies

 

A NAND flash memory supply agreement under which Samsung will provide Seagate with its market-leading semiconductor products for use in Seagate's enterprise solid state drives (SSDs), solid state hybrid drives and other products

 

A disk drive supply agreement under which Seagate will supply disk drives to Samsung for PCs, notebooks and consumer electronics

 

Expanded cooperation between the companies to co-develop enterprise storage solutions

 

Samsung receiving significant equity ownership in Seagate

 

A shareholder agreement under which an executive of Samsung will be nominated to join Seagate's Board of Directors

 

The combined value of these transactions and agreements is approximately $1.375 billion USD, which will be paid by Seagate to Samsung in the form of 50% stock and 50% cash.

 

These transactions and related strategic agreements will enable both companies to better align their current and future product development efforts and roadmaps, accelerate time-to-market for new products and position the companies to better address rapidly evolving opportunities in markets including, but not limited to, mobile computing, cloud computing and solid state storage. In connection with its strategic alliance with Samsung, Seagate expects also to strengthen its relationship with TDK Corporation/SAE Magnetics (H.K.) Ltd. Together, these transactions and agreements broaden a strategic relationship between Seagate and Samsung that began with a joint development agreement announced in August 2010.

 

"We are pleased to strengthen our strategic relationship with Samsung in a way that better aligns both companies around technologies and products," said Steve Luczo, Seagate chairman, president and CEO. "With these agreements, we expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers, while facilitating our long-term relationship with Samsung."

 

Seagate expects these transactions and agreements to be meaningfully accretive to non-GAAP diluted earnings per share and cash flow within the first full year following the closing, and Seagate does not expect any material restructuring costs in connection with them.

 

"Delivering value to the market and consumers is the primary goal of the extensive agreement announced today. Samsung looks forward to extending our existing strategic ties with Seagate, to deliver creative technology solutions for a broad diversity of consumer, business and industrial applications," said Oh-hyun, Kwon, president of the semiconductor business of Samsung Electronics.

 

The transactions and agreements significantly expand Seagate's customer access in China and Southeast Asia. In addition, the mutual supply agreements enable Seagate to secure an important source of leading-edge NAND flash supply as the company expands its SSD and solid state hybrid product offerings, and position Seagate to be a more significant supplier of disk drives to Samsung. The agreement also gives Samsung a significant ownership position in Seagate.

 

Under the terms of the agreement, Samsung will receive consideration consisting of 50% Seagate ordinary shares and 50% cash. Upon closing, Samsung will receive Seagate ordinary shares valued at $687.5 million (45.2 million shares, or approximately 9.6% ownership of Seagate, which is based on Seagate's 30-day volume weighted average stock price prior to signing), plus $687.5 million in cash. Samsung will have a right to designate a nominee to join Seagate's Board of Directors following closing.

 

The agreement has no financing contingencies, and is subject to customary closing conditions, including review by U.S. and international regulators. The transactions are expected to close by the end of calendar year 2011.

 

Morgan Stanley & Co. Incorporated served as financial advisor and Wilson Sonsini Goodrich & Rosati, Professional Corporation served as legal advisor to Seagate in connection with the transaction. Allen & Company LLC served as financial advisor and Paul, Hastings, Janofsky & Walker LLP served as legal advisor to Samsung.

 

Conference Call

 

Seagate will host a conference call at 5:30 a.m. Pacific Time to discuss the transaction. In addition, Seagate will discuss its third quarter 2011 financial results on the same call."

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Are Mechanical drives the way forward tho?  Is that why Hitachi and Samsung have disposed of their HDD businesses?  (They the think the market is likely to decline long term)

 

The system drive market is quickly moving to SSD's for speed reasons. However, I highly doubt SSD large scale storage will bypass platter drives price wise for a good many years. The flash technology really isn't moving very fast and it won't grow to compete with platter drive prices any time in the next few years. Last I checked, a 2T SSD is about $8k or so and that price certainly won' be dropping to anywhere close to $70 by this time next year.

 

Also, it's not worth paying a very large premium for a SSD home/backup/media storage solution since the speed of such isn't a major concern where the speed of the OS drive is a concern. In the enterprise world, speed can be achieved by striping and using cache memory on the controllers.

 

Peter

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A downside I see.

If one manufacture has a serious production flaw, it could create some interesting market conditions while people flood to the other vendor.

 

On the contrary, it incentivises both to RAISE quality control and production reliability to prevent exactly that scenario.

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Three primary benefits to Seagate -

  • Increased HDD volume should help them in terms of production efficiency
  • Technology from Samsung HDDs should improve their products
  • Special supply agreements with Samsung for NAND - aka Seagate is going after SSD business

 

Downside to consumers -

  • We're @#$%ed

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Are Mechanical drives the way forward tho?  Is that why Hitachi and Samsung have disposed of their HDD businesses?  (They the think the market is likely to decline long term)

 

The system drive market is quickly moving to SSD's for speed reasons. However, I highly doubt SSD large scale storage will bypass platter drives price wise for a good many years. The flash technology really isn't moving very fast and it won't grow to compete with platter drive prices any time in the next few years. Last I checked, a 2T SSD is about $8k or so and that price certainly won' be dropping to anywhere close to $70 by this time next year.

 

Also, it's not worth paying a very large premium for a SSD home/backup/media storage solution since the speed of such isn't a major concern where the speed of the OS drive is a concern. In the enterprise world, speed can be achieved by striping and using cache memory on the controllers.

 

Peter

 

Yes, I'm taking a more long term view however.

 

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I have only bought Seagate for a number of years now.  I don't really care about the merger as long as I don't inavertantly get a relabeled samsung drive when I meant to buy a Seagate.  

 

SSD's aren't going to be replacing hdd in the storage market for a decade or maybe ever.  But the market for desktop computers using a ssd will increase when the prices come down a whole lot.  HDD's are a commodity and volume is required to make money.  It's a tough business.

I'd buy an SSD for my desktop when I can get 120GB for under $100.

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(Young People) SSD's are Blu-Ray & HDD are HD DVD's.

(Old People)    SSD's are VHS & HDD are BetaMax.

 

Maybe one of these mergers will be the final nail in the HDD coffin.  Can you say the Hard Drive version of the PS3?  I wouldn't trade my SSD's for any HDD.  We just need more people to become early adopters to drive prices down.  If no one buys them, they will stop making them. (Not that I don't have 40 some HDD in various PC's in my house.)  ;D

 

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