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Seagate sucks hard disk biz from Samsung

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It's done: Seagate has completed the transaction to acquire Samsung's hard disk drive business. Now it has to do the grunt work of integrating the two product lines.

Seagate has gained Samsung’s Spinpoint MP4 and M8 line of 2.5in HDDs and a boffinry centre in South Korea. Samsung employees joining Seagate include a number of senior managers and design engineers from the S. Korea facility, who will focus on the development of small form-factor products for the mobile compute market.

This transaction was announced in April 2011 along with a series of other agreements between Seagate and Samsung. Seagate is supplying disk drives to Samsung for PCs, notebooks and consumer electronics devices. Samsung is supplying flash chips for use in Seagate’s enterprise solid state drives (SSDs), solid-state hybrid drives and other products. The companies have also extended and enhanced an existing patent cross-licence agreement and increased cooperation to co-develop enterprise storage products.

All this is said to substantially expands Seagate’s customer access in China, Southeast Asia, Brazil, Germany and the Russian Federation.

Seagate kingpin Steve Luczo - president, chairman and CEO - said Seagate and Samsung have aligned their product development efforts and roadmaps to get new kit to market faster.

Overlapping products

Seagate will retain certain Samsung HDD products under the Samsung brand name for 12 months, and maintain or establish a number of independent operations including sales staff, key production lines and R&D. Customers can find more information at www.seagate.com/samsung.

Samsung has three 2.5-inch products:

  • Spinpoint MP4 7,200rpm, up to 640GB, 2-platter notebook drive
  • Spinpoint M8 5,400rpm, to 1TB, 2-platter notebook drive
  • S3 Portable 3.0 5,400rpm, up to 640GB external drive, thought to contain an MP4 disk.

Seagate's 2.5-inch product line is much more extensive:

  • Savvio 10,000rpm, up to 900GB, 3-platter, enterprise tier-1 drive
  • Constellation 7,200rpm, up to 1TB, 4-platter, enterprise tier-2 drive
  • Momentus 7,200rpm, up to 750GB, 2-platter notebook drive
  • Momentus 5,400rpm, up to 750GB, 2-platter notebook drive
  • Momentus Thin 5,400rpm, 320GB, 1-platter notebook/ultrabook drive
  • Momentus XT 7,200rpm, 750GB + 8GB flash, 2-platter hybrid notebook drive
  • FreeAgent GoFlex 5,400rpm, up to 1.5TB external drives.

El Reg assumes that Samsung's S3 Portable line will be subsumed into the FreeAgent GoFlex line and disappear. The MP4 overlaps with the Momentus 7.2K and will disappear, possibly quite soon. The M8 has more advanced technology than the Momentus 5.4K and that technology will, we think, be used in a future Momentus 5.4K line although the SpinPoint M8 brand will likely go away after 12 months.

The money side

Calendar year 2010 revenue for Samsung’s HDD business was approximately $3.1bn with some 66 million drives shipped, but Seagate may not retain the whole amount of this revenue due to customers rebalancing HDD purchases from suppliers.

The combined value of these transactions and agreements is approximately $1.4bn, consisting of 45,239,490 Seagate Ordinary Shares and the remaining balance settled in cash. Samsung will designate a nominee to join Seagate’s board of directors. Seagate doesn't expect significant restructuring costs and expects to achieve significant reductions in overall operating expenses for the combined business.

Meanwhile Western Digital expects to close its Hitachi GST purchase transaction in March. This delay is a concern, according to a Wall Street Journal report, to Hiroaki Nakanishi, Hitachi's president, as there could be further hold-ups because approval for the deal from all the international regulators involved, such as the Chinese, has yet to be obtained.

There is no mention of the deal unravelling though. ®

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