It is official: Samsung has sold its hard drive business unit to Seagate
Let's face it; everybody knew that Samsung would not have a problem finding a buyer for its hard disk business. And most people would also have guessed that given Samsung's small but respectable market share in the HDD business, it would not take too long before a buyer shows up at Samsung's office with a bag full of cash and and offer to purchase that aforementioned business unit. Which is precisely what just happened today; Seagate is now in the midst of combining its own HDD business with that of Samsung's as we bring you this report.
Sometimes, it does not take a genius to predict what certain major hardware companies have up their sleeves, especially when it has got something to do with acquisitions. Sure, certain acquisitions have been known to be so unexpected that not even the most accomplished speculator or business analyst could have foreseen the result (like HP purchasing Palm Inc), but there also exists deals whose outcomes are so obvious that it makes one wonder why the companies involved did not just simply announce the deal and get it over with.
And unfortunately (or fortunately) for Samsung, its latest deal with Seagate over the fate of its hard disk business unit was a classic example of the latter. As most people would remember, speculations were rife that Samsung was planing to sell off the unprofitable business unit, and that Seagate would be the most likely candidate to pony up the money Samsung is asking for in a bid to increase its share of the HDD pie, simply because Western Digital would be essentially asking for an FTC investigation on itself if it were the one to do so. And just as most people have predicted, it was indeed Seagate which stepped up to the negotiating table with Samsung, and has walked away with the latter's HDD business unit in exchange for the total sum of US$1.375 billion in both cash and stock options.
So what does this mean for Samsung, Seagate and the end-users who are still heavily reliant on mechanical hard disks for their storage needs? Well, the fact that Samsung has received a cash injection of almost US$1.4 billion means that the Korean electronics giant now has the money it needs to invest in other profitable divisions under its banner, so end-users can expect to see more interesting consumer electronic devices being churned out from Samsung's factories in the very near future. Also, the agreement will see Samsung adopting the use of Seagate's hard disks for a wide variety of products in its offerings, such as its notebook divisions.
On the other hand, Seagate will reportedly see a 10% increase in the market share of its hard disks. This figure, when added to Seagate's existing market share, will result in Seagate claiming almost 40% of the global HDD market. This will put Seagate in a very good position to compete against the likes of Western Digital, which current owns as much as 50% of the global HDD pie. In addition, the agreement will see Samsung supplying Seagate with NAND flash, as well as extending existing patent agreements currently in effect among both companies.
However, things are slightly different as far as the end user is concerned, simply because consumers now have lesser choices to choose from when it comes to HDD selection. With Seagate and Western Digital both owning 40% and 50% of the global HDD market respectively, this leaves Toshiba as the only other major competitor left with approximately 10% of the HDD market. This means that there is a very real possibility of seeing a duopoly in the HDD market like the one that is currently present in the x86 processor market (Intel and AMD), and we can only wait and see how this is going to affect the end user.