Samsung Selling Hard Drive Unit? Seagate a buyer?
Today the Wall Street Journal reported that Samsung was mulling the sale of its hard drive unit. Seagate has been rumored as a potential buyer which makes a lot of sense. With the pending Western Digital – Hitachi tie-up it makes sense. As ServeTheHome noted at the time of the Western Digital – Hitachi GST announcement:
“At the end of the day, after the move Samsung is likely to gain some desktop share from those companies that purchased Hitachi drives because they did not want to purchase Seagate or Western Digital. The deal will put WD in the clear #1 spot with Seagate as #2. It will be interesting to see if Seagate can find the financing to make a run at Samsung to close the desktop and notebook gap that is now between Seagate and Western Digital.”
Samsung’s interest in leaving the hard drive space is not surprising as Western Digital will be the clear #1 and Seagate will be a #2 several times larger than Samsung. In a business largely reliant upon economies of scale, the WDC-Hitachi GST merger may have been too much for Samsung to withstand.
One other strong possibility is that if Seagate balks at the estimated $1B to $1.5B it Samsung is reportedly looking for, is that a private equity firm will pick up the struggling asset for a relatively low price. Several PE firms were reportedly looking at Seagate only a few months ago so it is logical to assume those same suitors are looking at this asset. Samsung’s biggest issue is that there is going to be immense downward price pressure as without a sale the new WDC and Seagate will have the ability to push Samsung out of the market.
For hard drive consumers, it is likely that this will leave a duopoly in the market. With both Samsung and Hitachi drives currently receiving great reviews, there is a real possibility that the loss of a third major hard drive manufacturer will leave the market with the existing Western Digital and Seagate technology that the parent companies are familiar with and their supply chain is able to handle. This was the case with the Seagate-Maxtor merger and unlike that acquisition, purchasing a customer list for $1B to $1.5B is probably less risky with only one other major competitor.
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