IBM blows away hard disk cobwebs

IBM has run in the new year by completing the $2.05bn (£1.28bn) sale of its loss-making hard disk operation to Hitachi.

Under the deal, which was approved last year by trade commissions in the US, Europe, South America and the Far East, Hitachi paid 70 percent of the price in cash on completion of the deal, and will pay the remainder over the next three years. The hard disk business will be reorganised into a new company called Hitachi Global Storage Technologies, in which IBM will initially hold a 30 percent stake that will diminish as the remained of the money is paid off.

The deal is expected to give Hitachi a leading position for hard drives for mobile applications, while the alliance with IBM should help Hitachi compete with EMC; when the deal was announced in April, IBM and Hitachi said they would collaborate on open-source storage systems.

Hitachi Global Storage Technologies will have about 24,000 employees in 11 centres around the world and will be based in California. Hitachi estimates that the new company should increase its sales from $5bn next fiscal year to $7bn by fiscal year 2006.

Hitachi aims to make the venture profitable on an operating basis in the business year beginning in April 2003. But analysts have said extensive restructuring will be needed. Hard drives, similar to other components for computers, have experienced slack demand and sharply reduced pricing in the past year. Indeed, IBM lost $423m on its storage business in 2001 -- losses that continued into 2002.

The dissolution of the hard drive operations included sales to computer equipment makers and, in some cases, to other IBM divisions for use in its own server and storage products, the company said.

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