Western Digital makes $4.3bn move on HGST

Channel sources believe move will allow HDD vendor to take on Seagate in enterprise space

Western Digital is set to become the undisputed silverback of the hard disk drive (HDD) market after agreeing to acquire rival Hitachi Global Storage Technologies (GST) for about $4.3bn.

Western Digital overtook main competitor Seagate at the top of the HDD rankings for the first time last year.

Under the terms of the agreement, which has approval from both boards, Western Digital will acquire Hitachi GST for $3.5bn in cash and 25 million Western Digital shares valued at $750m.

The deal, news of which sent Western Digital's shares soaring by more than 10 per cent this morning, will give Hitachi Ltd a 10 per cent stake in Western Digital.

John Coyne, who will remain as president and chief executive officer of Western Digital, said: "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."

One distribution source said he could see the logic of the transaction: "Western Digital does not have a high-end enterprise product and has bought into something that matches it with Seagate."

However, the distributor argued the move may not go down so well with some OEMs, most of whom triple- or at least double-source. "They like choice," he said. "Toshiba or Seagate may gain from this."

The deal is expected to close in the third calendar quarter of 2011.

Fourth-quarter 2010 figures from analyst iSuppli show that Western Digital and Seagate remain neck and neck, shipping 52.2 million and 48.9 million units respectively. Hitachi GST remained in third on 30.3 million units.