Toshiba Got Fujitsu HDD Business

Fujitsu Limited and Toshiba Corporation have signed a memorandum of understanding (MOU) on the transfer of Fujitsu’s hard disk drive (HDD) business to Toshiba. The companies plan to conclude a transfer contract at an early date, and aim to complete the transaction in the first quarter of fiscal 2009.

Fujitsu will facilitate the transfer by bringing its HDD-related businesses and functions together in a new company. Toshiba will acquire about an 80 percent stake in this company and make it a Toshiba Group subsidiary. In order to promote a smooth transfer, Fujitsu will continue to hold a stake of under 20 percent in the new company for a certain period of time, after which it will become a wholly owned subsidiary of Toshiba.

The consolidation of the two companies’ HDD businesses will enable Toshiba to reinforce its already strong position as a leading vendor of small form factor HDDs (2.5-inch and smaller HDDs), widely used in notebook PCs, mobile devices, automotive and consumer electronics. It will also give Toshiba entry into the enterprise HDD market for server and data storage system applications, where Fujitsu is currently a leader. Toshiba aims to build its position in the enterprise market to meet expected growth in demand for data storage systems.

Entry into the enterprise business will allow Toshiba to further enlarge its market-leading solid state drive (SSD) business by developing SSD products for servers and enterprise storage systems, fusing Toshiba’s NAND flash memory technology with Fujitsu’s enterprise HDD technology. This move is expected to spur expansion of the rapidly expanding SSD market.

By taking advantage of the integration of Fujitsu’s HDD businesses, Toshiba also aims to strengthen collaboration with HDD parts suppliers and to promote cost reductions and the development of new technologies.

Going forward, Toshiba aims to build on the consolidation to raise its share in the overall HDD market to over 20 percent by 2015.

Details of Transfer:
Under the MOU, Fujitsu will transfer to Toshiba its HDD design, development, manufacturing, sales, and all other functions currently carried out by Fujitsu and Fujitsu Group companies, with the exception of Fujitsu’s HDD head and media businesses.
The following are expected to be the main assets covered by the transfer:
Fujitsu’s HDD development, manufacturing, and sales divisions

HDD manufacturing subsidiaries Fujitsu Computer Products Corporation of the Philippines (FCPP) and Fujitsu (Thailand) Co., Ltd. (FTC)
HDD design, development, quality assurance and other departments of Yamagata Fujitsu Limited
HDD technology development department of Fujitsu Laboratories Ltd.
HDD sales and marketing offices outside Japan

Comments

In relation to the discontinuation of its financial-troubled HDD business, Fujitsu plans to recognize a one-time, facilities-related loss of ¥5.0 billion ($56.1 million) in the consolidated financial statements for the third quarter of fiscal 2008 ended December 31, 2008.

Adding Fujitsu and Toshiba shipments, the new entity is now the number four HDD manufacturer behind Seagate and WD, not far from Hitachi GST, but now largely surpassing Samsung. The sixth and last one is small actor ExcelStor. Note that neither Toshiba nor Fujitsu are involved in 3.5-inch desktop devices, the biggest market in term of units shipped.

The real change concerns the 2.5-inch notebook sector. Here, the addition of the two companies represents the number two maker, just behind WD but now largely in front of Hitachi GST and Seagate, and this market is growing faster than the desktop or enterprise one. Toshiba and Samsung are the sole producers of 1.8-inch HDDs.

Finally, Toshiba decided to keep the Fujitsu's enterprise drives to get the knowledge of Fujitsu in this field with the idea to use it for future enterprise SSDs. That's a good reason. Following this acquisition, Toshiba will produce drives for which the flash technology is the biggest competitor: 2.5-inch devices for notebooks and fast 3.5-inch units for high-end storage systems.

There could be more consolidation in the future even if only six companies now remain in this HDD market. Wait to see if ExcelStor will be able to compete with its small size and if Samsung will accept to continue to lose money.

Real also:
Now, It's Toshiba in Talks to Buy Fujitsu's HDD Ops
After WD finally out of the game