Seagate buys Samsung’s HDD operations; 3 majors remain

And then there were three.

Last month we watched as Western Digital acquired Hitachi’s hard drive business for several billion dollars, leaving only three additional key players in the HDD industry. Now, Seagate has announced their $1.375 billion purchase (half cash, half stock) of Samsung’s storage operations, leaving Toshiba as the only other major remaining competitor.

Seagate buys Samsung's HDD operations; 3 majors remain

Under the agreement, Samsung and Seagate will combine HDD operations and will develop agreements to cooperatively supply consumer and enterprise products including NAND flash, SSD, and hybrid drives.

“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,” the companies said in a joint statement Tuesday.

Seagate CFO Patrick O’Malley spoke with Reuters after the announcement and downplayed the threats that rising flash and SSD demands in increasingly popular portable devices pose to the HDD market. “We look at tablets as a good thing as they will spur data-rich consumption, which is certainly good for storage and HDD storage,” he said.

O’Malley also emphasized that the company sees a bright future for the SSD industry. “SSD business is primarily in the enterprise space. Today, it is still a small percentage, but longer term it could be 5-10 percent of the total enterprise market.”

Consumers following these mergers and acquisitions in the storage industry are likely wondering how much all of this is going to impact HDD prices, and rightly so. Wedbush Securities analyst Kaushik Roy says that there will be far fewer price wars with the lack of competition. “Hard disk drive is a commodity business,” Roy points out. “It’s very hard to make money if rivals try to undercut each other.”

As far as HDD market share is concerned, WD/Hitachi currently has about 50%, while Seagate/Samsung will now hold about 40%. Seagate/Samsung, however, is the largest revenue generator, with WD Hitachi ranking 2nd, and Toshiba a distant 3rd in both market share and revenue.