Hitachi GST takeover calms channel
Western Digital leaves competitors far behind with Hitachi acquisition, raising hopes that HDD channel will stabilise
Western Digital's acquisition of Hitachi GST could help stabilise savage price erosion in the HDD channel, according to distribution sources.
In the largest tech takeover of the year so far, Western Digital last week tabled a $4.3bn (£2.7bn) bid for its smaller rival Hitachi GST.
According to analyst firm iSuppli, Western Digital overtook Seagate as the largest HDD manufacturer in Q1 of last year, and it shipped 52.2 million units to Seagate's 48.9 million in Q4, while Hitachi GST remained in third place with 30.3 million units shipped.
Steve Bland, sales director of distributor KMS Components, said the elimination of another player would come as a welcome relief to the UK components channel.
He said ASPs on 1TB and 2TB SATA drives had fallen 10 to 15 per cent between January and February alone, with many of the price decreases being driven by Hitachi GST itself.
"The amount of price pressure in the market is continuing to push prices down, leaving all of us in the channel fighting to make money," explained Bland.
"We are now down to five brands. To have one fewer competitor can only be a good thing as it will stabilise pricing across the brands that are left."
The acquisition will also give Western Digital a huge lead in the channel, according to figures from analyst firm Context.
Western Digital commands a 53 per cent share of distributor sales in Europe's leading economies, according to Context, with Seagate on 27.7 per cent. Hitachi GST would hand it another 9.5 per cent of the market.
Alexandre Mesguich, vice president of enterprise research at Context, said that the acquisition would fortify Western Digital's position in the enterprise space.
He pointed out that Hitachi GST's share of 1TB SATA sales through distribution rose from 8.8 per cent to 23.8 per cent year on year in the final quarter of 2010.
"Western Digital will strengthen its leadership with this move," said Mesguich. "Maybe it is out to secure the HDD market so it can invest more in other areas [such as solid state drives (SSD)]."
IT marketing specialist Andrzej Bania added: "2011 is going to be a very unpleasant time to be in the bare hard drive business.
"Booming markets like tablets and smartphones are all using SSDs, so it is unlikely that innovation or price cuts are going to win Western Digital much business - it needed to evolve a defensive strategy.
"Apart from straight economies of scale, this move will also give Western Digital control of the Hitachi hard drive plants that exist inside some of China's biggest system builders, like Great Wall. If a hard drive is made onsite, then there is no incentive to shop elsewhere. This is a good example of the kind of protectionism we are likely to see in the future."