Seagate and Samsung, Together at Last
Dec 20th 2011 5:52PM
Updated Dec 20th 2011 5:54PM
Back then, it was called a "broad strategic alignment." Today, it's called an "acquisition."
Whatever you want to call it, Seagate Technology (NAS: STX) has now completed its planned acquisition of Samsung's hard disk drive (HDD) business after eight long months. The deal was initially announced in April under the first moniker, with fellow Fool Anders Bylund aptly calling out the duo in their semantic dance.
The $1.4 billion deal gives Samsung roughly 45.2 million shares, or roughly 9.6% ownership, of Seagate, with the difference settled up in cash. Samsung will also get to pick a nominee for Seagate's board. As if we needed more evidence that solid-state drives (SSD) are the future, the acquisition will strengthen Seagate's enterprise SSD and SSD hybrid drive offerings through Samsung's semiconductor products. Seagate will supply drives to Samsung for use in its PCs and other devices.
The pair has also extended its existing patent cross-licensing agreement and will work together to develop enterprise-storage offerings, which is where Fusion-io (NYS: FIO) is also trying to make a name for itself.
Seagate expects the transaction to be accretive to non-GAAP earnings in the first full year after today's closing. The company also doesn't foresee significant restructuring costs and hopes to capture some cost-saving synergies.
A month before this deal was announced earlier this year, Western Digital (NYS: WDC) led the way by pouncing on Hitachi's (NYS: HIT) HDD business. That transaction is still in the works, but it recently cleared European Union regulatory muster. With the heavyweights in the sector quickly consolidating, smaller SSD specialists such as OCZ Technology (NAS: OCZ) and STEC (NAS: STEC) may be going up against growing Goliaths.
The hard-drive industry has been awash with troubles since the floods in Thailand, although Seagate escaped mostly unscathed. The ripples from the overflow have spread throughout the PC industry, leading Intel (NAS: INTC) to cut its guidance recently because of HDD shortages.
With all the consolidation that's been happening in the sector, I wouldn't be surprised if some of the smaller players end up getting swallowed by the swelling titans -- but probably not until they have sufficient time to digest their latest meal.
Don't forget to use our useful -- and free -- Watchlist feature to stay updated with the latest news and analysis of the data storage sector. Add these companies to see whether any of them get swallowed whole, or whether they're the ones doing the swallowing.
- Add Western Digital to My Watchlist.
- Add Seagate Technology to My Watchlist.
- Add STEC to My Watchlist.
- Add OCZ Technology Group to My Watchlist.
- Add Fusion-io to My Watchlist.
At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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