Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

Summary: Western Digital on Monday acquired Hitachi Global Storage Technologies in a cash and stock deal valued at $4.3 billion and grabbed a big foothold in the enterprise market.

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TOPICS: Hardware, Storage
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Western Digital on Monday acquired Hitachi Global Storage Technologies in a cash and stock deal valued at $4.3 billion and grabbed a big foothold in the enterprise market.

Simply put, Western Digital's acquisition of Hitachi's storage unit transforms the company. One look at IDC's most recent storage standings highlights how the acquisition changes the game for Western Digital.

Western Digital, primarily a consumer storage player, will now battle Dell to be a top 5 storage player.

Indeed, Western Digital will offer everything from personal storage devices to solid-state enterprise drives. Once this acquisition closes, there will be only four major hard drive makers---Seagate, Western Digital, Toshiba and Samsung. Hitachi's storage unit was planning to go public.

Western Digital CEO John Coyne said on a conference call:

About 10 years ago we looked at the industry landscape and it was clear that product breadth, scale, and vertical integration would be critically important in order to deliver compelling customer value in a growing and highly competitive industry. At that time we had none of these attributes. In the ensuing years we acquired and successfully integrated in heads and media, and we expanded beyond our desktop routes into the consumer electronics, branded nearline enterprise, mobile, and solid-state markets.

Western Digital operating chief Tim Leyden said:

With the combined entities we will be able to optimize our capital investments as we improve the efficiency of our respective asset bases, reduce operating expenses, and increase our competitiveness. As for the combination of our two entities, we will have the hard drive industry's broadest product portfolio across the mobile, desktop, enterprise, consumer electronics, branded, and solid-state drive markets, providing a tremendous value to our customer base. Perhaps most powerfully, the pooling of our intellectual property, R&D, and engineering capabilities will provide a very strong technological foundation.

Under the terms of the deal, Western Digital is paying $3.5 billion in cash with the remainder paid for via 25 million Western Digital shares. Hitachi will own 10 percent of Western Digital when the deal is done. The companies said they expect the merger to close in the third quarter.

For Western Digital, the transaction will add to non-GAAP earnings immediately. Coyne, CEO of Western Digital, will remain in charge and with Leyden and CFO Wolfgang Nickl reporting to him. Steve Milligan, CEO of Hitachi GST, will report to Coyne.

On the conference call with analysts, Western Digital said there would be operating expense cuts. Western Digital executives were also confident that they could carry out any restructuring efforts. That topic was a big question since Hitachi has struggled with restructuring before with its Japanese ownership.

Bottom line: The acquisition of Hitachi will allow Western Digital to better navigate the boom and bust cycle in the storage industry.

Related: Tablets, price discipline may whack hard drive makers

Topics: Hardware, Storage

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15 comments
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  • WD cleans the house.

    I'm happy for WD because they make solid hard drives (no pun intended) and since HGST quality generally sucks, I hope this improves their quality as well. Of course, I speak from a small-time consumer point of view as I have had terrible experience with HGST "Deathstar" hard drives. I will not comment on their enterprise solutions because I don't know how well they performed, but seeing as how they are being bought by a competitor I will say that it probably didn't do so well.
    statuskwo5
    • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

      @statuskwo5
      HDS storage arrays (also sold by HP as their XP series) are industry leading, and IMHO far superior to anything EMC ever produced. HP used to resell EMC but switched to Hitachi because EMC did not have mirrored write cache until 5 or 6 years later. While they may have closed the gap since, the HDS arrays are still a better value.
      914four
  • My two preferred Hard Drive Brands

    are now one. Aside from a few WD drives have been very good to me and is why I have stuck with them over the years.
    bobiroc
    • Hitachi HDDs are not related to this deal: only enterprize storage products

      @bobiroc
      DDERSSS
    • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

      @bobiroc Nice troll
      Jimster480
  • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

    This is a bomb waiting to drop - this is not HDS - this is a hard drive mfg outfit. They are NOT going to challenge Dell or anyone else for Datacenter Storage business. There will be some red faces over this slip-up. Watch the stock price as people realize they've been had.
    jingle2
  • Don't confuse HGST and HDS

    HGST was the old IBM disk drive manufacturing unit that they unloaded on Hitachi in 2003 after getting a reputation for engineering and quality problems.<br><br>HDS is the enterprise storage division of Hitachi that makes high-end systems for datacenters, competing against EMC, IBM, and HP.<br><br>Two different animals, and WD did not acquire any of the technology or assets of HDS.
    terry flores
  • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

    I think t he writer has two units of Hitachi confused. HGS doesn't really compete with Dell or EMC, etc. It is HDS (Hitachi Data Systems) that plays here and that is not moving to WD. HGS makes drives only--no "finished systems" products, like HDS (some -sourced- from EMC,) EMC, Dell, HP, IBM, etc.

    Uncle Ron
    UncleRon
  • Hitachi &quot;DeathStar&quot; hard drives

    This is a bad move for WD. Hitachi made crappy drives for another manufacturer--IBM and they were so bad, IBM made them buy them all back. I had two clunkers in a row under the Hitachi brand, maybe WD will make a substantial fix (I hope so), but this deal is a fire sale. I don't plan on buying drives that are half the price of everyone else's, because of their name.
    MikeR
    Doc Disco
    • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

      Deathstar is the perfect description for the dreadful disks Hitachi have been churning out for years. I had several fail on me, including one with irreplaceable photos on it (this was the one that taught me to back up regularly). I tried Seagate and WD, and the latter became my absolute faves. If there's any risk of buying WD and getting a Hitachi in wolf's clothing, then I'm staying the hell away from WD from now on.
      bluebeard66
    • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

      @Doc Disco Well WD has been making shitty drives for years now. With almost a 100% failure rate on the drives me and my friends have purchased both for business and personal usage, ill continue to stay away from WD.
      Jimster480
  • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

    Hitachi made the best drives in the business, this is either good for WD or bad for Hitachi.
    gtatransam
  • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

    So two crappy makers of HD's merging? To only make a larger piece of trash. How nice.
    Jimster480
  • Get your act together before you write an article like this

    HGST (Hitachi Global Storage Technologies) had nothing to do with HDS (Hitachi Data Systems) besides being a sister company and one of the disk suppliers for the HDS storage subsystems. The combined company of WD and HGST does not play in the external dis storage subsystem market.
    elonden
  • RE: Western Digital buys Hitachi's storage unit for $4.3 billion, eyes enterprise

    This a sad day for the hard disk industry. Hitachi used to make super reliable drives.
    techsgin