Monday, March 7th 2011

Western Digital to Acquire Hitachi Global Storage Technologies

Western Digital and Hitachi, Ltd. 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.
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43 Comments on Western Digital to Acquire Hitachi Global Storage Technologies

#1
dir_d
Smart move since 90% of the enterprise market is Hitachi drives.
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#2
Swamp Monster
So they bough't Hitachi completely or just a part of it?
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#3
Sasqui
Wall Street apparently likes the idea, WDC stock is up almost 17% this morning. Whoa!
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#4
AthlonX2
HyperVtX™
by: Swamp Monster
So they bough't Hitachi completely or just a part of it?
storage technologies..so anything you keep data on
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#5
ASharp
by: Swamp Monster
So they bough't Hitachi completely or just a part of it?
Storage division.

Edit: Bah...ninja'd.
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#6
Sasqui
by: Swamp Monster
So they bough't Hitachi completely or just a part of it?
^ to add to that, Hitachi has many different divisions, HD's are just part of it, which is what is being acquired by WD:


"Hitachi, based in Tokyo, is redefining itself as a provider of power plants, trains and other infrastructure following four years of losses. The company had considered breaking off the hard-drive business in an initial public offering last year. The unit had sales of $4.8 billion in the year ending in March 2010, accounting for about five percent of total revenue.
Western Digital’s “strength is different from Hitachi,” Hitachi President Hiroaki Nakanishi said in a press conference today. Hitachi will bring a stronger lineup for enterprise customers, he said. The deal will also make Hitachi the largest shareholder of Western Digital, according to Nakanishi.

The Hitachi unit’s chief executive officer, Steve Milligan, will become president of the combined companies, reporting to Western Digital CEO John Coyne. Milligan joined Hitachi from Western Digital in 2007. Western Digital and Hitachi said they expect to complete the deal in the third quarter."
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#7
FreedomEclipse
Crazy Dogmatic Bullsh!t!
AHHHHHHHHH theres nothing quite like buying out potential competition
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#8
PVTCaboose1337
Graphical Hacker
I hope we can tell the difference between WD classic and Hitachi drives, if they do indeed change the Hitachi label. I don't want to be buying WD and getting a Hitachi.
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#9
n-ster
Hopefully they will make a clear difference between the Hitachi drives, WD has a good rep for now, if we find out Hitachi drives come i some of the WD drives, I'm not sure if it will be good for them

On another note, maybe PS3s and Dell computers etc etc will come with WD drives now :p
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#10
Swamp Monster
^^ I think reviews will help a lot, atleast for now there is visible difference in performance charts between them.
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#11
n-ster
I'm more worried about reliability. I've had so many hitachi drives fail on me
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#12
sparkyar
by: n-ster
I'm more worried about reliability. I've had so many hitachi drives fail on me
I second that
:(
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#13
dir_d
Well i think this move was to diversify their portfolio. WD is really big in the end user scene and Hitachi is a giant in the enterprise server/SAN/NAS scene. This will make WD a powerhouse against Seagate and Samsung in all markets across the board.
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#14
jsfitz54
I bought 2 IBM/Hitachi drives, 46GB, 10 years ago that were bad drives. Cost then $200 each. I never purchased Hitachi again.

I will never be interested in Hitachi again. So for me this is a bad because I have only bought WD or Samsung drives.
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#15
PopcornMachine
by: btarunr
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.
Well I much prefer a NON customer-focused company. :p
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#16
xrealm20
Hitachi enterprise class drives work quite well, seems to be a great move for WD - This should give them great enterprise penetration as their RE series drives have never quite taken off in the business sector...
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#17
HalfAHertz
Hitachi produce(produced?) DDR memory too. Did WD acquire their DDR plants and patents too?
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#18
RejZoR
What about WD RE4 and Seagate Constellation drives? Are they used widely for enterprises?
Or is Hitachi really dominating this segment so much?
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#19
stereotype
Since Hitachi bought IBM's hard drive division in 2003, they make the most reliable HDs one can buy... Also their recovery / diagnostic software is the most comprehensive, also inherited from IBM... I guess it's a win-win for all those who liked WD in the first place...
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#20
Jack Doph
Well.. This might inspire me to have more confidence in WD drives then, as my experience with WD is the worst of any HDD manufacturer of the last 20 years or so.
However.. this is reducing the choice, competition-wise, to even fewer manufacturers.. Not sure about that part of the deal though :/
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#21
FreedomEclipse
Crazy Dogmatic Bullsh!t!
by: Jack Doph
this is reducing the choice, competition-wise, to even fewer manufacturers.. Not sure about that part of the deal though :/
thats an easy one - stick with samsung hard drives
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#22
Jack Doph
by: FreedomEclipse
thats an easy one - stick with samsung hard drives
Very good point!
Just a pity about the apparent lack of HDD manufacturers though..
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#23
FreedomEclipse
Crazy Dogmatic Bullsh!t!
with the current economy the way it is, it was bound to happen sooner or later. Fujitsu was the first to withdraw from making hard drives (i think) because they werent making any money on it.

just because theres one less brand out on the market doesnt make it any less competitive. the way youre talking, its like if every hard drive manufacturer makes hard drives that break within the first 5mins of installation.

Nobody will really notice Hitachi slowly vanishing from the hard drive market
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#24
Jack Doph
by: FreedomEclipse
with the current economy the way it is, it was bound to happen sooner or later. Fujitsu was the first to withdraw from making hard drives (i think) because they werent making any money on it.

just because theres one less brand out on the market doesnt make it any less competitive. the way youre talking, its like if every hard drive manufacturer makes hard drives that break within the first 5mins of installation.

Nobody will really notice Hitachi slowly vanishing from the hard drive market
Nah, not really. But, competition is already becoming scarce in that arena, so the fewer there are, the harder it gets choice-wise..
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#25
FreedomEclipse
Crazy Dogmatic Bullsh!t!
theres still 4 or more major manufacturers (from the top of my head) and all of them with the exception of Maxtor, all make solid products. its not that hard to choose from. they might be different companies but they make a RANGE of hard drives to choose from.



And with the SSD market taking off. who knows what will be of hard drives in 10-20years time.
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