Published on March 8th,2011 at 10:38 AM
By >Daimaou - G.G-B

Game Over, Western Digital buys Hitachi GST

Game Over, Western Digital buys Hitachi GST

When Seagate acquired Maxtor I had my doubt on the company built quality future, and my doubt has been clearly been confirmed since I am going to send my ninth Barracuda 7200.11 Drive to Seagate Support (6 Faulty drives in the past 12 month) and now it Western Digital HDD future owners will share the same faith since the company announced that it has acquired Hitachi GST one of the least reliable HDD manufacturer left on the market. Seagate gone, Western Digital gone we are now just left with Samsung… Scary!

Western Digital (NYSE: WDC) and Hitachi, Ltd. (NYSE: HIT / TSE:6501) announced today that they have entered into a definitive agreement whereby WD will acquire Hitachi Global Storage Technologies (Hitachi GST), a wholly-owned subsidiary of Hitachi, Ltd., in a cash and stock transaction valued at approximately $4.3 billion. The proposed combination will result in a customer-focused storage company, with significant operating scale, strong global talent and the industry’s broadest product lineup backed by a rich technology portfolio.

Under the terms of the agreement, WD will acquire Hitachi GST for $3.5 billion in cash and 25 million WD common shares valued at $750 million, based on a WD closing stock price of $30.01 as of March 4, 2011. Hitachi, Ltd. will own approximately ten percent of Western Digital shares outstanding after issuance of the shares and two representatives of Hitachi will be added to the WD board of directors at closing. The transaction has been approved by the board of directors of each company and is expected to close during the third calendar quarter of 2011, subject to customary closing conditions, including regulatory approvals. WD plans to fund the transaction with a combination of existing cash and total debt of approximately $2.5 billion.

WD expects the transaction to be immediately accretive to its earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges and amortization of intangibles.

The resulting company will retain the Western Digital name and remain headquartered in Irvine, California. John Coyne will remain chief executive officer of WD, Tim Leyden chief operating officer and Wolfgang Nickl chief financial officer. Steve Milligan, president and chief executive officer of Hitachi GST, will join WD at closing as president, reporting to John Coyne.

“The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate,” said John Coyne, president and chief executive officer of WD. “We believe this step will result in several key benefits-enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace. The skills and contributions of both workforces were key considerations in assessing this compelling opportunity. We will be relying on the proven integration capabilities of both companies to assure the ongoing satisfaction of our customers and to bring this combination to successful fruition.”

“This brings together two industry leaders with consistent track records of strong execution and industry outperformance,” said Steve Milligan, president and chief executive officer, Hitachi Global Storage Technologies. “Together we can provide customers worldwide with the industry’s most compelling and diverse set of products and services, from innovative personal storage to solid state drives for the enterprise.”

Hiroaki Nakanishi, president, Hitachi, Ltd. said, “As the former CEO of Hitachi GST, I always believed in the potential of Hitachi GST to become a larger and more agile company. This is a strategic combination of two industry leaders, both growing and profitable. It provides an opportunity for the new company to increase customer and shareholder value and expand into new markets. Additionally, it is important to us that WD shares common values with Hitachi GST to create a more global company that is well positioned to define a broader role in the evolving storage industry.”

WD’s exclusive financial adviser on the transaction is Bank of America Merrill Lynch; its lead legal adviser is O’Melveny & Myers LLP. Goldman, Sachs & Co serves as financial adviser to Hitachi, Ltd. and Hitachi GST. Legal advisers to Hitachi, Ltd. and Hitachi GST are Morrison Foerster LLP and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, respectively.

Category Storage
              
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Comments
 

  • fh

    Just wondering how you consider Hitachi GST to be unreliable. The lifespan of any single drive is unpredictable, regardless of brand. Some lucky people have no problems with any kind of drive they buy; other people just have bad luck and their drives fail no matter what brand.

    That said, Seagate and Samsung have some fundamental flaws to their drives: Seagate has had trouble with power management, causing their motors to burn or wear out prematurely; and Samsung is comparatively inexperienced when it comes to building mature firmware. Compared to those problems, Western Digital and Hitachi are actually pretty reliable (but again some people just have bad luck). I’ve had my share of failed drives from ALL brands; but Seagate and Samsung are by far the worst offenders (many other users report similarly high failure rates).

    In any case, considering how cheap magnetic storage is, there’s no reason for anyone not to have redundancy or backup (using something like Drobo, or even a basic RAID system).

    • AaronD12

      I have very good luck with Hitachi’s hard drives. Originally purchased from IBM, their GMR perpendicular head recording technology is rock-solid and fast. I certainly hope Western Digital adopts this technology in their own drives. Then again, how much longer are we going to use rotating storage? SSDs FTW!

  • hakashi

    Wrong, we have a HUGE advantage of running a SSD drive. That leaves Intel and OCZ.

    I wished there was a way in the future to tell a Hatachi drive from a WD one.

 

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