Samsung Sells Its Hard Drive Unit to Seagate
Samsung reportedly wants the cash, which will amount to $687.5 million, to reinvest in new growth areas like solar cells
By: Maureen O'Gara
Apr. 21, 2011 10:00 AM
Samsung is selling its money-losing hard drive business to Seagate Technology for about $1.375 billion, half stock, half cash, with Samsung winding up with about 9.6% of Seagate and a seat on the board.
The sector is said to be another victim of the flash-bearing iPad and its ilk, which are contracting HDD demand. Price wars have further impacted margins.
Western Digital recently agreed to take Hitachi's hard disk business for ~$4.3 billion in cash and stock, giving it half the market. Seagate is supposed to have 32% and with Samsung would have around 40%. Toshiba and Fujitsu are the other HDD players.
Samsung reportedly wants the cash, which will amount to $687.5 million, to reinvest in new growth areas like solar cells.
In their announcement Tuesday morning, the pair said the deal "will enable both companies to better align their current and future product development efforts and roadmaps, accelerate time-to-market for new products and position the companies to better address rapidly evolving opportunities in markets including...mobile computing, cloud computing and solid state storage."
The deal involves an extended patent cross-license and side agreements for Samsung, the biggest of the NAND flash chipmakers, to supply Seagate with semiconductors for its enterprise flash drives and Seagate to supply Samsung with finished disk drives for it PCs, notebooks and consumer electronics.
They're also supposed to co-develop enterprise storage solutions.
Seagate expects to get greater access to customers in China and Southeast Asia.
The deal should close by the end of the year. Seagate figures the combination to be "meaningfully accretive" to its non-GAAP earnings per share and cash flow in the year after the deal closes and does not expect any material restructuring costs.
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