Toshiba to buy Fujitsu's storage business, challenge Hitachi

Toshiba, Japan's biggest chipmaker, will buy Fujitsu's unprofitable computer-storage drive business to help narrow its gap with industry leader Seagate Technology in the $32.6 billion market, Bloomberg reports.

Toshiba aims to buy 80 percent of the business by the quarter ending June 30 and eventually acquire full ownership, the company said today.

The companies said they have yet to agree on a price, estimated by Deutsche Bank Group AG to be "hundreds of billions of yen."

The combination would almost double Toshiba's market share in hard-disk drives to about 16 percent, rivaling Hitachi's rank as the industry's third-largest producer. The sale allows Fujitsu to shed a business that's been unprofitable since 2007 to focus on providing computer services.

"The acquisition will help Toshiba secure the market share necessary to survive continuing consolidation in the crowded disk-drive market," said Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo.

Toshiba fell 3.9 percent to close at 248 yen on the Tokyo Stock Exchange before the announcement, extending the stock’s drop this year to 32 percent. Fujitsu slipped 0.6 percent to 362 yen as the Nikkei 225 Stock Average declined 1.4 percent.

Revenue at the hard-disk drive business will rise to about 600 billion yen ($6.5 billion) in the year ending March 2013, Toshiba said, without giving comparative figures. Toshiba, the industry's fourth-ranked producer, said the Fujitsu business will help raise its market share to 20 percent by 2015.

Toshiba had 8.7 percent of the hard-drive market by unit shipments in 2008, compared with 7.3 percent for Fujitsu and 17 percent for Hitachi, according to Tokyo-based Techno Systems Research Co. Seagate led the industry with a 31.8 percent market share, followed by Western Digital's 26.9 percent, according to the research firm.

Hard-drive revenue worldwide will probably fall 19 percent to $26.3 billion this year as competition drives down prices and the global recession leads to a drop in shipments, according a JPMorgan Chase & Co. report today. Industry sales are forecast to resume growing next year, according to the report.