Western Digital buys platter maker Komag

Western Digital has bought hard disk media manufacturer Komag, in a $1bn cash deal that sets it on course to go vertically-integrated, like Seagate and Hitachi GST.

The deal and the price look even more astonishing when you realise the WD used to own a disk platter business, but sold it at a loss in 1999 - to Komag.

Since then WD has bought in its disk platters, instead of making them itself, and was one of Komag's major customers. Buying its supplier - albeit at what looks like a fat price - makes WD self-reliant, and should let it cut prices and increase margins in a fiercely competitive business.

"This acquisition is a significant step in the evolution and differentiation of WD as a leader in the world-wide hard drive industry," said John Coyne, the drive-maker's president and CEO, describing the volte-face yesterday.

"This acquisition will enable WD to optimise synergies through the integration of heads and media, secure our long-term supply of media, and sharpen our ability to deliver high quality, highly reliable and cost-effective products to our customers," he added, to cries of "House!" from the buzzword bingo players in the audience.

WD already owns its disk head production, having bought Read-Rite four years ago in what then looked like a one-off deal.

The Komag deal could cause a few short-term headaches for WD's rivals who have now lost a supplier - even Seagate and Hitachi buy platters from Komag when their own factories can't keep up with demand. Those two will now need to shift their business to Komag rivals such as Showa Denko, Fuji, and Hoya, analysts said. ®