No. of Recommendations: 1
Hi everyone,

Western Digital announced that it's buying the disk drive portion of Hitachi (HGST) for about $4.3 billion in a cash + stock deal. $3.5 billion in cash and 25 million shares (at $30.01 each or $750 million), leaving Hitachi owning about 10% of Western Digital and giving them two board seats.

Somewhat unusually as acquirer, Western Digital's stock shot up on the news. It eliminates one of its big rivals, reducing the field from five to four players (Seagate, Samsung, and Toshiba being the other three).

An interesting provision is that Western Digital is not taking any of HGST's debt in the purchase.

One point that came up in a couple of the analyst questions during the call was market share loss. Western Digital expects a bit of share loss form the combination, but management wasn't willing to put a number on it. Consistently answered that it would be up to customers on whom they buy from for best deal and keeping competition high.

All in all I think this is going to work out pretty well for Western Digital. It has one less competitor to worry about, one less source of HDD overcapacity, and becomes the undisputed leader in the HDD space. I agree with management when they say that, essentially, all the digital content both on and off the web has to be put somewhere, and that is going to be on disk drives.

A bright spot in an otherwise down day.

Cheers,
Jim
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.