Feeds

WD cleared to gobble Hitachi GST

Complicated Brussels nod isn't a simple go for it

Next gen security for virtualised datacentres

The EU has said Western Digital can buy the Hitachi GST disk drive business but only if it sells off some 3.5-inch drive production capacity to an EU-approved buyer.

The $4.3bn purchase of Hitachi GST, recently renamed Viviti Technologies, is conditional "upon the divestment of essential production assets for 3.5-inch hard disk drives (HDD), including a production plant, and accompanying measures", which include "the transfer or licensing of the IP rights used by the divestment business, the transfer of personnel and the supply of HDD components to the divestment business."

The commission thought that the acquisition of Hitachi GST would, with Seagate buying Samsung's disk drive business, reduce the number of disk drive suppliers to three – Toshiba being the third one.

It foresaw particular problems in the 3.5-inch disk market because Toshiba was a minor player in only the enterprise sector of the 3.5-inch market via a Fujitsu HDD business acquisition, meaning only two suppliers effectively: Seagate and WD.

This led to WD's divestment proposal with, obviously, only Seagate or Toshiba being potential purchasers and both of them knowing it will be a distress sale with WD anxious to sell so that it can complete the Viviti purchase, meaning low-ball bids will be the order of the day.

If Seagate buys the business, then there will still be only two effective competitors in the 3.5-inch desktop and consumer disk drive business. So the logic of the Commission's thinking leads to a Toshiba purchase, meaning three competitors, which, by extension, means that Toshiba, as the preferred or only buyer, could bid a really low price.

Joaquín Almunia, the Commission vice-president in charge of competition policy, said: "The proposed divestiture will ensure that competition in the industry is fully restored before the merger is implemented."

What nonsense. The merger won't fully restore competition as it and the Seagate-Samsung deal reduce five competitors to three. Selling off the odd disk drive plant won't change that one iota. If the EU lets Seagate buy the 3.5-inch plant then it is exacerbating the issue it defined as a problem. If it says Toshiba is the only approved buyer then it's getting WD to subsidise Toshiba's entry into a market it has eschewed up until now, and one Toshiba may not want to enter at all.

However, Stifel Nicolaus analyst Aaron Rakers, a close follower of WD, believes that TDK, a maker of disk drive heads and sliders, could be an alternative purchaser to Toshiba. Whether TDK would want to enter the HDD market, a market in which global industrial scale is now mandatory for lowering costs of operations, with a single plant, is questionable.

It's a bugger's muddle entirely due to European Commission meddling. Poor old WD has to fork out millions of dollars to re-build its flooded Thailand operation, pay Seagate half a billion bucks or more after an arbitration award, pay money for the follow-on technology to perpendicular magnetic recording, and now has to sell off a dratted 3.5-inch disk drive plant at a probable thumping loss to satisfy an EU bureaucrat's unrealistic idea of fully restored competition. ®

Gartner critical capabilities for enterprise endpoint backup

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
Cutting cancer rates: Data, models and a happy ending?
How surgery might be making cancer prognoses worse
Silicon Valley jolted by magnitude 6.1 quake – its biggest in 25 years
Did the earth move for you at VMworld – oh, OK. It just did. A lot
Forrester says it's time to give up on physical storage arrays
The physical/virtual storage tipping point may just have arrived
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?