WD to Acquire Fujitsu HDD Business?

It’s a scoop revealed by the Nikkei Business Daily: Fujitsu may sell storage business to Western Digital. And the report even wrote a price range: between ¥70 billion ($660 million) to ¥100 billion ($943 million). Of course, both companies didn’ t confirm the information but the daily paper is a reliable Japanese source.

The rumors of more consolidation is periodic in the HDD business: Fujitsu, Hitachi GST or Samsung being acquired by Seagate or WD, or merger between Fujitsu and Toshiba.

Does the industry need a consolidation? Not really but Seagate and WD are so strong that it’s difficult for their competitors to be profitable. But the dream of all the HDD makers is to see the end of one of their rivals to limit the price pressure. We personally think that this price war will continue even if just two of them remain alive. You cannot imagine a price cartel between big firms like these, all of them being public. And you cannot imagine the U.S. Federal Trade Commission accepting less than two companies in one sector as big as the HDD industry.

The acquisition of Fujitsu HDD business by WD could be an excellent operation for the U.S. maker with a remarkable executive management these last years. With Fujitsu, WD could finally enter into the enterprise disk market, notably with SAS and FC units, where it is absent, add some good R&D in Japan and additional assembly capacities in the Philippines and in Thailand, as well as a small production of disk media.

In term of market share, the combined companies will become the leader of the market, with a slightly margin over Seagate, the historical number one of the rigid disk drive industry.

HDD retired guru Jim Porter from Disk/Trend wrote: “Back in the 1980’s, we were looking at a total of rigid disk drive manufacturers which got up to 77 companies.” Without Fujitsu, and following the acquisition of Maxtor by Seagate, the figure will be five. No more. And don’t expect any start-up emerging in this field, for two reasons: 1/ the investment is much too heavy; 2/ the new company will be immediately harassed by the current manufacturers for patent infringements.