Mergers & Acquisitions

Mergers & Acquisitions

April 19, 2011

Reports Confirm Seagate's Purchase of Samsung's HDD Unit

It was only yesterday in the news that we learned of Samsung’s (News - Alert) possible sale of its hard drive unit to save some cash.

The tech company was considering selling off its hard-drive unit. Citing an unnamed person familiar with the matter, The Wall Street Journal reported that South Korea’s is hoping to raise about $1.5 billion in the sale, though it may settle for less than $1 billion to rid itself of the business. The source told the Journal that, in no uncertain terms, “Samsung is trying to get rid of [its HDD operation],” and one of its chief competitors, Seagate (News - Alert), is a potential buyer.

Today, reports confirm that Seagate is, in fact, purchasing the HDD unit for a reported $1.38 billion.

The payment will be made half in cash and half in Seagate stock. Once completed, Samsung will own 9.6 percent of Seagate's stock and Samsung will also appoint an executive to Seagate's board of directors.

Other aspects of the deal involve a NAND flash memory agreement that has Samsung providing Seagate with its flash products for use in Seagate's solid state drives. In return, Seagate will supply Samsung with hard disk drives for its PCs, notebooks and other CE products.

The two companies have agreed to enhance existing cross-licensing agreements and expand cooperation to co-develop enterprise level storage solutions.

“We expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers, which facilitates our long-term relationship with Samsung,” said Steve Luczo (News - Alert), Seagate’s chairman.

According to Bloomberg, this deal will give Samsung a boost, as its competitor Western Digital (News - Alert) Corp. took the lead last month when it purchased Hitatchi LTD.

“This can’t be bad for Samsung,” Han Seung Hoon, an analyst at Korea Investment & Securities in Seoul. “Samsung’s hard-disk business hasn’t really been making money, so with this deal, they can be more competitive.”

Samsung began making hard-disk drives in 1989 and the business is part of the company’s semiconductor unit. After selling the division, Samsung will focus on its chip operations, while Seagate will be able to secure “a strategic status” in the global market, Samsung said.

Michelle Amodio is a TMCnet contributor. She has helped promote companies and groups in all industries, from technology to banking to professional roller derby. She holds a bachelor's degree in Writing from Endicott College and currently works in marketing, journalism, and public relations as a freelancer.

Edited by Jennifer Russell

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