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Western Digital Corp. (WDC) has announced it will purchase Hitachi Global Storage Technologies (Hitachi GST) for $4.3 billion in cash and stock.
The acquisition means that Western Digital will become a major player in the enterprise hard disk drive (HDD) segment, which has higher profit margins than drives used in consumer products. Currently, most of WDC's sales are for drives used in consumer computers, set-top boxes and video game consoles.
Only about one percent of WDC's shipments had gone to the enterprise segment, according to researcher IHS iSuppli. About 27 percent of Hitachi GST's shipments are to the enterprise market, according to IHS iSuppli.
Hitachi GST, based in San Jose, Calif., makes both 3.5-inch and 2.5-inch HDDs with SATA and SAS interfaces, which are used extensively in the enterprise segment.
"Hitachi GST brings WDC the essential technology, product portfolio, and experience required to compete in the enterprise segment," said Fang Zhang, storage systems analyst at IHS iSuppli.
The acquisition will help Western Digital, headquartered in Irvine, Calif., to shore up market share in a difficult market. HDD shipments in the first quarter of 2011 are anticipated to reach 160.9 million units, down 3.9 percent from 167.5 million in the fourth quarter of 2010, according to IHS iSuppli.
HDD shipments are being impacted by the rising sales of tablets, which don't use HDDs and are cutting into the shipments of mobile PCs, a major market for hard drives.
The acquisition has been approved by the board of directors of both companies and is expected to close in the third quarter.