Western Digital drops $4.3 billion to acquire Hitachi GST, enter staring contest with Seagate
Yow. Western Digital — the company responsible for shipping the planet's first 1TB 2.5-inch hard drive way back in 2009 — just announced a monstrous deal to acquire one of its primary competitors, Hitachi Global Storage Technologies.
Context & Ripple Effects
Western Digital had already used capacity milestones and more intuitive backup drives to differentiate its storage lineup, including the first 1TB 2.5-inch drive in 2009. Seagate, meanwhile, paired hard-drive scale with a new flash-memory business and networked consumer-storage products.
The proposed purchase shifts Western Digital from competing primarily through products to adding a primary disk-drive rival's business, sharpening the competitive focus on Seagate.
First-order effects
- Western Digital gains a path to absorb Hitachi Global Storage Technologies through the announced $4.3 billion transaction, expanding its position in hard drives.
- Hitachi Global Storage Technologies' operations and customers become part of Western Digital's acquisition plan rather than an independent competitive constraint.
Second-order effects
- Seagate faces a larger proposed hard-drive rival while it is preparing a 3TB drive and building a flash-memory business, increasing the importance of differentiation beyond conventional capacity gains.
Third-order effects
- If major drive vendors continue to combine scale acquisitions with moves into adjacent storage formats, the market may concentrate around fewer suppliers able to compete across capacity, backup and flash offerings.
The trend: Hard-drive makers are pursuing scale and adjacent storage capabilities as capacity milestones alone become a less durable basis for competition.