Samsung Electronics said that it would sell its hard disk drive business to Seagate Technology for $1.38bn in order to focus on memory chips. Samsung is world’s largest memory chip maker in terms of sale. The deal announced on Tuesday, is certain to attract attention from regulators around the world as it would reduce the number of companies making hard disc drives to just three – Seagate, Toshiba and Western Digital. The deal will take the form of 50 per cent stock and 50 per cent cash, giving Samsung a 9.6 per cent stake in Seagate and the right to nominate an executive to join the board of directors. The sector is battling persistent sales growth declines and faces a longer-term threat from wireless tablet devices such as Apple’s iPad that use more power-efficient flash, or solid state, drives (SSD). On this occasion, Seagate Chief Financial Officer Patrick O’Malley said:
“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 told Reuters by telephone.
The rising popularity of tablets is expected to drive demand for external drives and for so-called ‘cloud’ storage — or online data storage — helping companies like Seagate.
“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,” O’Malley said.
“Mainframe enterprises — the Yahoos and Googles of the world — have a lot of storage needs.”
Both Seagate and Western Digital have been struggling to adapt to a future where fewer consumers have laptops and many view flash drive as the future of the disk drive industry. This announcement comes just a month after Western Digital said it would buy the HDD unit of Hitachi Ltd for $4.3 billion. It will increase Seagate’s market share to 40 percent.