Roundup: Western Digital Buys Hitachi GST

Computerworld - There are several forces driving the need for consolidation in the HDD market, including slower product cycles made necessary because vendors can't squeeze more capacity onto a single platter as fast as they used to. "With more competition, pricing worsens," said Brian Babineau, an analyst with research firm Enterprise Strategy Group. "On the demand side, there is significant competition from flash within the PC business accelerated by the transition to tablets. Enterprise storage systems now include SSDs and other flash-based technology. With lack of differentiation on the supply side coupled with threats to the demand side, this industry was ripe for consolidation"

eWeek.com - Although Hitachi makes most of the HDDs found in Apple PCs, iPods and servers for a consumer market, the lion's share of the its business is in enterprise servers and storage arrays -- which is a growing market (yes, growing) and one in which WD did not play to any great degree. WD had become No. 1 in the world -- and in the process overtaking a worthy market competitor, Seagate, last year -- by knowing how to manage those often paper-thin consumer-product margins into good profitability.

Deal Journal (WSJ) - The hard drive world has been seen as ripe for consolidation, particularly as the rise of tablet computers such as the Apple iPad– which don’t use hard drives for data storage — is casting doubt on the future of the sector.

GigaOm - Despite the excitement around SSDs, the spinning disks inside a data center aren’t going anywhere any time soon. They store more information for less, and further consolidation will help bring prices for the commodity drives down. It’s getting harder for too many players to make money in this commoditized market and thus the consolidation has been occurring for years.

The Register - One aspect of the deal is that WD gets access to the Hitachi GST/Intel solid state drive (SSD) project, which should give WD an entry into the enterprise SSD market. It had been expected that Hitachi Data Systems would use the Hitachi GST/Intel SSDs and Nakanishi's comment can be viewed as supportive of this.

Tech Trader Daily - Barrons.com - JMP Securities’s Alex Gauna thinks the deal is a bad thing for Marvell Technology Group (MRVL), which supplies controller chips to the disk drive industry. Western is a 21% customer of Marvell’s, while Seagate represents less than 10% of Marvell’s revenue. Judging by what happened when Seagate bought Maxtor in December of 2005, it’s quite possible Marvell will loose business as Western consummates the deal, Gauna argues, because customers will switch to buying more gear from Seagate, at least for a time. “To the extent that diversification efforts this time result in a swing back towards Seagate, this time the effect would be negative,” given Western’s prominence as a Marvell customer, he writes.