Seagate has agreed to acquire Samsung's hard drive business for $1.375 billion in a deal that gives Samsung a 9.6 percent stake in the hard-drive specialist and that forges an alliance for the new era of flash memory storage.
The companies announced the deal today, a new step in the steady consolidation of a major part of the computing industry. Last month, Western Digital signed a deal to acquire Hitachi's hard-drive unit for $4.3 billion, thereby vaulting it over Seagate to become the largest hard drive maker. Seagate's deal today would reduce the market to just three main players, the two hard-drive specialists and Toshiba.
Under today's deal, Segate will pay $1.375 billion, half stock and half cash, to Samsung. Seagate will supply Samsung with hard drives for its computers and consumer-electronics products, while Samsung will supply Seagate with flash memory for business-grade solid-state disk (SSD) storage products, the companies said.
Flash-based drives are a major trend in the computing industry, offering advantages in performance, power consumption, ruggedness, and silent operation. However, the cost per gigabyte is considerably higher for flash storage. Samsung is one of the world's largest manufacturers of flash memory.
The deal is expected to close by the end of 2011. The Wall Street Journal reported the deal yesterday.
Also as part of the deal, the companies will cooperate on enterprise storage product development, a Samsung executive will be nominated to Seagate's board, and the companies will expand their current patent cross-licensing agreement.
And Seagate expects to gain better access to companies manufacturing products in China and Southeast Asia, the company said. "In addition, the mutual supply agreements enable Seagate to secure an important source of leading-edge NAND flash supply as the company expands its SSD and solid state hybrid product offerings, and position Seagate to be a more significant supplier of disk drives to Samsung," it said.