Two of the major players in the digital storage industry joined forces on Monday as Western Digital (WD) acquired Hitachi Global Storage Technologies (GST) for $3.5 billion in cash, and an additional 25 million stock shares worth $750 million.
The acquisition makes WD the dominant company in the global HDD & SSD markets with a 49% share of shipments, nearly double that of the now #2 supplier, Seagate.
“This brings together two industry leaders with consistent track records of strong execution and industry outperformance,” said Steve Milligan, Hitachi GST president and CEO, in the press release announcing the deal. “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.”
“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,” added John Coyne, president and CEO of WD. “The skills and contributions of both workforces were key considerations in assessing this compelling opportunity.”
The deal actually serves to give WD more of a boost in the enterprise storage market than with consumer products, where margins are much lower on sales. Before the acquisition, WD’s share of the enterprise market was a mere 1%, a stark contrast to Hitachi’s 27% share.
Now that the industry only has 3 remaining key players (Seagate, Toshiba and Samsung), consumers are finding themselves having to either deal with the acquisition or overcome long-standing grudges. HDD and SSD buyers are quite loyal to their favorite brand with a special loathing for the competition, as comments on Tom’s Hardware following the announcement reveal.
Personally, I find it disappointing that an industry with such little competition now has even less, but I do believe that WD made a smart move that will largely benefit the company’s operations. Hopefully, pricing and quality of SSD and HDD’s will both remain competitive despite the deal.