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Seagate is gobbling up Samsung's HDD business for $1.375B USD, half in cash, and half in stock.  (Source: LucasFilm)

The companies are forming a "broad alliance". Seagate will provide Samsung with HDDs for its notebooks and the companies will work together to design enterprise solutions.  (Source: Tom's Hardware)

Samsung will also license its significant NAND (flash memory) IP to Seagate, opening the door to new Seagate SSDs and hybrid drives.  (Source: Samsung)
There's now only three major HDD players in the market

And then there were three.  March saw Western Digital Corp. (WDC) scoop up the fourth largest manufacturer of hard drives, Hitachi Global Storage Technologies (a unit of Japanese electronics giant Hitachi Ltd.), for a cool $4.3B USD.  

Now Seagate Technology PLC (STX) has announced that it will be devouring the HDD unit of South Korea's Samsung Electronics Co. Ltd. (005390).  The deal is valued at $1.375B USD -- 50 percent in stock and 50 percent in cash.

For the consumer, the deal means that, in effect, you now only have three major choices when it comes to disc drives -- Seagate, Western Digital, and Japan's Toshiba Corp. (6502) (formerly in fifth place, now bumped to third, thanks to the acquisitions).

Seagate writes in a press release:

Seagate and Samsung announced that they have entered into a definitive agreement under which they will significantly expand and strengthen their strategic relationship by further aligning their respective ownership, investments and key technologies.

The sale, like the acquisition of Hitachi last month, is likely the result of an industry-wide struggle in the face of new technology.  HDD manufacturers are facing increasing sales pressure from solid-state drives (SSDs).  The manufacturers have responded with price cuts, but the cuts have hurt their bottom lines.

The deal, however, runs much deeper than a mere sale.  Samsung and Seagate, according to the release, are committing themselves to a "broad strategic alliance".  The roots of that alliance trace back to a joint development agreement that the companies agreed upon in August 2010.

As part of this "alliance", both companies commit to cross-licensing intellectual property with each other.  Both companies have large IP holdings, so it’s unclear exactly what is covered under the deal, but suffice it to say this is likely a significant provision.

Additionally Seagate promises to supply Samsung HDDs for its consumer notebooks and other devices.  That's a boost for Samsung as it is in the process of trying to gain a major chunk of PC market share.

The two companies have also agreed to develop enterprise-aimed solutions (likely business notebooks, storage area network devices (SANs), etc.).

Both the intellectual property and the joint marketing efforts will likely lead to Seagate leveraging Samsung's mature NAND flash memory technology.  Samsung will reportedly supply NAND to Seagate for hybrid HDDs and dedicated SSDs.

The stock options that Seagate is granting Samsung are particularly important, as well.  According to Seagate, they represent "significant equity ownership" -- or a major chunk of the company.  As part of a deal, and perhaps directly as a result of gaining this chunk, Samsung will now get to have one of its executives sit on Seagate's board of directors. 

Seagate chairman, president and CEO [press release 2], "We are pleased to strengthen our strategic relationship with Samsung in a way that better aligns both companies around technologies and products. With these agreements, we expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers, while facilitating our long-term relationship with Samsung."

Nestled inside the company's second press release was a statement that Seagate would also "strengthen its relationship" with Japan's TDK Corp./SAE Magnetics (H.K.) Ltd. (6762).  TDK recently sold its flash and optical storage media holdings to 3M Comp. (MMM) spinoff Imation Corp. (IMN).  TDK still maintains significant research and development holdings, though, and develops brushless hard drive motors and other small HDD parts.

The deal between Samsung and Seagate still has to receive approval from the U.S. Federal Trade Commission and its South Korean equivalent, the South Korea Fair Trade Commission.  It is expected to receive approval according to The Wall Street Journal, the first source to report on the rumor of the pending acquisition.  The two companies do not significantly compete with each other, so the deal will likely not be viewed as a competitive risk or in violation with antitrust rules.

Seagate is incorporated in Dublin, Ireland, but has its principal executive offices in Scotts Valley, California.  The company owns approximately 25-30 percent of global hard drive sales, according to various estimates.  Samsung owns between 10 and 15 percent. 

The FTC has, in recent months approved a number of high profile acquisitions in the technology sector, including Oracle Corp.'s (ORCLacquisition of Sun Microsystems, Intel Corp.'s (INTCacquisition of McAfee, and Hewlett-Packard Company's (HPQacquisition of Palm, Inc.  In addition to the Seagate-Samsung deal, its docket also includes an evaluation of U.S. cell phone service provider AT&T, Inc.'s (Tpending acquisition of T-Mobile (DTE).



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RIP
By tastyratz on 4/19/2011 8:56:22 AM , Rating: 3
RIP spinpoints. A tear is shed today by geeks around the globe. Shame on you samsung for teasing us with great drives then getting out when it just starts looking up.

Funny how they will be approved by lack of monopoly. 2 companies now control ~96%~ ish of the magnetic drive market. Clearly we have learned nothing by leaving only intel and amd to their devices?




RE: RIP
By RdBiker on 4/19/2011 9:08:48 AM , Rating: 2
Ah but you see the market will sort itself out :)

It surprises me though that Samsung couldn't get their operations profitable :S Their drives were popular so did they lower the prices too low?

As a side note, I fell in love with the Spinpoint F3 103SJ 1TB drives and now own a total of five. I couldn't find a better performance/capacity/price mix so I'm probably buying a few more this summer.


RE: RIP
By Taft12 on 4/19/2011 9:35:34 AM , Rating: 2
quote:
It surprises me though that Samsung couldn't get their operations profitable :S Their drives were popular so did they lower the prices too low?


In short, yes. However, they had no choice but to follow the other manufacturers' lead.

Margins on consumer hard drives are a couple percentage points at best. Seagate and WD make pennies on these drives too. It's the enterprise market where the real money is made. Samsung had no presence here (which is why Hitachi's HD business was worth so much more)


RE: RIP
By Solandri on 4/19/2011 2:09:52 PM , Rating: 2
Also note that the two remaining HDD manufacturers (Seagate, WD) are primarily HDD manufacturers. Samsung and Hitachi also make a wide variety of other (more profitable) products. It made sense for them to ditch the money-losing or razor-thin-margin HDD divisions so they could concentrate on other products.


RE: RIP
By Operandi on 4/19/2011 6:00:59 PM , Rating: 2
I agree; I always thought it was a bit odd that Samsung even got in the business to begin with. Hitachi seemed to have a better strategy with their enterprise level storage products but their gone as well. Was Hitachi loosing money as well?


RE: RIP
By Ushio01 on 4/19/2011 9:36:12 AM , Rating: 2
There 3.5" HDD's were popular with the 2.5" HDD's being less so and it's with the 2.5"'s that the money is.


RE: RIP
By StevoLincolnite on 4/19/2011 11:33:20 AM , Rating: 3
Honestly... I wish the acquisition was the other way around. (With Samsung's size, buying Seagate would be like pocket change!)
I could have still been able to get the awesome Spinpoint F3 drives then. :(


RE: RIP
By BadgerPoison on 4/19/2011 12:59:53 PM , Rating: 3
The deal was better for Samsung.

First, they now own a size able chunk of Seagate's equity (I didn't look at all the details but it could be somewhere in the ~20% range).

Second, Seagate paid a premium because it needs the disk business to survive while Samsung does not need the disk business to survive. I would guess that Samsung is more interested in the flash business which it still owns.


RE: RIP
By someguy123 on 4/19/2011 5:28:12 PM , Rating: 2
Bad for us HDD consumers, though. The spinpoints were mighty fine magnetic drives. Samsung's SSDs are just average in the sea of SSD drives.


RE: RIP
By Azethoth on 4/20/2011 4:10:16 AM , Rating: 2
"The deal was better for Samsung."
Nah, Seagate sounds like it just bought the job to supply all of Samsung's HDD needs. Also, if they cross licensed then Seagate may also get access to SSD components and or business.


RE: RIP
By jonmcc33 on 4/20/2011 6:52:51 AM , Rating: 2
Yeah but they kill the Samsung HDD line. They did the same thing with Maxtor. Don't want to put another brand's product on the market.

It's a shame because Samsung drives are both the quietest and coolest running drives I have ever owned. Far cry from Seagate's boiling hot monsters.


RE: RIP
By TSS on 4/19/2011 11:22:07 AM , Rating: 2
quote:
Funny how they will be approved by lack of monopoly. 2 companies now control ~96%~ ish of the magnetic drive market. Clearly we have learned nothing by leaving only intel and amd to their devices?


This is not entirely true. Now we have a direct competitor to the HDD itself: The SSD. It already has an huge advantage in speed, only capacity is lacking (for a good price anyway). However, SSD technology is fairly young while HDD technology has been streched to the limits of physics. We already have 3TB drives and the theoretical limit of perpendicular recording was what? 5TB?

It's more likely we'll find an awnser to the rapid deterioration of small flash cells then a way to pack more bits on a platter.

Thus it's only logical HDD companies merge to cover the increased cost of R&D and to stay competative with the SSD market. This is a good thing, because eventually as the R&D costs for SSD's will become larger as well and those companies will merge as well.

In time i'd predict even seagate and WD will merge, probably in a few years when a few SSD producers have merged and the technology is finally ready to challenge the last stand of the HDD: $ per GB.

It's of course sad that the best isn't always the last man standing, but it's alot better then having all these companies go under and leaving the SSD with no competitor.


RE: RIP
By tastyratz on 4/19/2011 12:26:44 PM , Rating: 4
You are talking quite a distant future however. SSD drives are becoming a competitor to magnetic drives for speed, noise, and battery life... but they are MANY MANY MANY years away from being even capable of similar storage levels even at astronomical price levels.

Let's treat it almost like Moore's law:

intel x-25m in late 2008 80gb was 595 msrp.
November they announced the x-25m in 120gb for 249msrp. Trend that to $7.50 per gig in 2008 and 2.07 gig end of 2010. For simplicity that's 185% price reduction year over year... HUGE.

If that drastic reduction was flat (and it will taper off trust me) then theoretically to reach the $0.04 per gig magnetic platter price point of today's drives (2tb/$75) will be 5175%

even more simple math 5175/185 = 28 years. 28 years before ssd prices are equal to those of today for mass storage in a technological standstill. This is caveman math but it's just to prove a point.

We will likely no be using nand OR magnetic platter drives in 28 years, and will have some better new technology in place in liu of what we have today.

Conclusion? SSD great for laptops and main desktop drives but the magnetic platter drive will likely live just as long as the ssd for storage solutions. Market trending pushing for notebooks over desktops will lead to a point where it is "good enough" and has acceptable levels of storage but there is no escape from magnetic drives for storage servers, media servers, the enterprise market, and home nas, etc. anytime soon. Magnetic hard drives are not going away, just losing market share on general purpose machines.


RE: RIP
By KompuKare on 4/19/2011 1:32:41 PM , Rating: 2
Excellent post. Sums up pretty much what I've been thinking although much better put.

Obviously process shrinks can only go so (as can HDDs areal capacity), but unless someone comes up with a new type or alternative to flash write cycles are going to become a limiting factor soon.

I keep coming across comments on SSDs along the line of 'I'm waiting to buy one next year where they'll be the same prices my HDD': Yeah, keep dreaming!

One thing which worries me: when SSDs become 'good enough' for laptops, prices of HDDs will likely raise since the volume will get a lot less if just desktops and enterprise will still be using HDDS.


RE: RIP
By KompuKare on 4/19/2011 1:32:41 PM , Rating: 2
Excellent post. Sums up pretty much what I've been thinking although much better put.

Obviously process shrinks can only go so (as can HDDs areal capacity), but unless someone comes up with a new type or alternative to flash write cycles are going to become a limiting factor soon.

I keep coming across comments on SSDs along the line of 'I'm waiting to buy one next year where they'll be the same prices my HDD': Yeah, keep dreaming!

One thing which worries me: when SSDs become 'good enough' for laptops, prices of HDDs will likely raise since the volume will get a lot less if just desktops and enterprise will still be using HDDS.


RE: RIP
By deathwombat on 4/19/2011 2:44:09 PM , Rating: 2
That's good logic, but SSDs don't have to get anywhere close to $0.04/GB to compete with regular hard drives. I put a 160 GB SSD in my 4 year old Core 2 desktop a year ago, and the speed and responsiveness is just amazing. A year later, I'm looking at Sandy Bridge and thinking, "my Core 2 is so fast, why do I need to upgrade?" That SSD has literally added years to the life of my PC. (And if Windows 8/9/10 finally slows it down, maybe I'll switch to Ubuntu 15.13 Wailing Wallaby and use Wine 2.1 for my Windows stuff.)

This past weekend, I booted up my mother's brand new i3 (or is it i5?) notebook with 250 GB 5400 RPM hard drive, and I cannot use that POS. I swear to God I will never buy another computer (desktop, notebook, or otherwise) that doesn't have an SSD. While I realize that a notebook CPU doesn't have the same performance as the desktop version, any 2011 Sandy Bridge should be at least as fast my 2006 Core 2, but if pair up an i3/5/7 with a spinning hard drive, I'll take the outdated computer with an SSD any day.

So, the question is, when will SSDs see mass adoption? I'll accept your premise that we won't have a 2 TB SSD for $75 until 2039 (though I expect one sooner than that), but not everyone needs a 2 TB hard drive. You buy one because, why not? It's only $75.

I have 500 GB of data, so I have a 160 GB SSD and a 1.5 TB HDD. I bought way more HDD than I needed because they're practically giving them away. If there had been a 600 GB SSD for $600, I would have bought that and not bothered with an HDD. At the high end, I'd say the magic price barrier is $1/GB. We're down to $2/GB now, so it won't be long before SSDs destroy the market for HDDs among extreme enthusiasts.

At the low end, I don't see most people spending much more than $100 on a hard drive, so that's the magical price point, leaving capacity as the only question. Most of the non-techie folks that I know use about 200 GB but, to be safe, I'll say that regular folks will switch when you can buy a 500 GB SSD for $100, so that's $0.20/GB. In theory, on die shrinks alone, we should get there in about 8 years, assuming a doubling of density every 2 years in according with Moore's Law and Intel's tick-tock strategy. If competition and economies of scale also factor into it, it could be even sooner.

So, I'm figuring that SSDs will truly compete with HDDs for market share sometime between 2013 and 2019. Here's hoping.


RE: RIP
By UnWeave on 4/20/2011 9:44:21 AM , Rating: 2
I think your math may be flawed. Assuming Moore's law-like growth, then the ratio of a year's $/GB over the previous year's $/GB will be constant - so if it halved from 2008 to 2009, it will half again from 2009 to 2010, and so on.

If in 2 years it went from 7.50 $/GB to 2.07 $/GB. That is a yearly decrease of ~52.5% from the previous year (note, 7.50*0.525*0.525 =~ 2.07).

So to find the number of years it will take to get to 0.04 $/GB, we have:

7.50 * (0.525)^(years) = 0.04

Solving gives a little over 8 years , but that's from 2008. Okay, so you're right in that it will flatten off and probably take a little longer, but ~8 years is way less than 28 - and I think that they will become mainstream before then, because people will be willing to pay a little more $/GB on an SSD than a HDD for the extra performance - e.g. 3 years from now we should be down to the 0.5/0.3 $/GB range; I know I'd take the $$$ hit.


RE: RIP
By frobizzle on 4/19/2011 12:46:19 PM , Rating: 2
Ever since Seagate bought out Connor (the absolute worst drives ever) I have avoided Seagate like the plague. I had good luck with Maxtors but then Seagate bought them out. I had okay luck with Samsung and now they are gone as well. Oh well, I guess it's WD for me in the future.


RE: RIP
By Reclaimer77 on 4/19/2011 6:51:07 PM , Rating: 2
Hard drive performance doesn't matter anymore. Companies are no longer going to be able to get a premium for hard drives because SSD's are taking over the performance storage market. As long as you have an SSD, ANY old hard drive will serve as a storage drive.

I don't think we'll have to wait long before Western Digital announces the end of the Velociraptor desktop HDD. They'll move to enterprise only, if they survive at all.

And before anyone brings up servers, those typically don't run desktop HDD's in the first place. So it's a moot point.

quote:
Funny how they will be approved by lack of monopoly. 2 companies now control ~96%~ ish of the magnetic drive market. Clearly we have learned nothing by leaving only intel and amd to their devices?


So your alternative would be what? Forcing companies to stay in business even if they can't make a profit and want to sell? Or just having them close their doors and have all those people out of work?

Go to Samsung with your sophomoric "haven't you learned from Intel!" argument and see how much of an idiot you'll make of yourself...


Not to Pick...
By mmatis on 4/19/2011 9:49:07 AM , Rating: 5
nits. but ya left out a "3" in your headline, twixt the "." and the "7". Unless the error is in the arty instead...




RE: Not to Pick...
By DanNeely on 4/19/2011 10:43:34 AM , Rating: 2
Reuters is reporting it as a $1.4bn deal, so I suspect 1.375 is the correct value. Since part of the deal is in stock, it's value will fluctuate with Seagate's price.

http://www.reuters.com/article/2011/04/19/us-samsu...


Source?
By MrTeal on 4/19/2011 10:42:57 AM , Rating: 2
quote:
The sale, like the acquisition of Hitachi last month, is likely the result of an industry-wide struggle in the face of new technology. HDD manufacturers are facing increasing sales pressure from solid-state drives (SSDs). The manufacturers have responded with price cuts, but the cuts have hurt their bottom lines.


Is there any source that you can attribute this too? SSDs have very low market penetration compared to HDDs. It seems a stretch to attribute the price cuts to the threat of SSDs as opposed to competition from the other big HDDs makers.

Readership at sites like DT not withstanding, SSDs are a tough sell to the majority of computer users. Not only do you have to pay 3x the amount for a 120GB SSD than you do for a 2000GB HDD, but then you have to explain that you probably still need a HDD for file storage, and you need to install all your applications on the boot drive, but then you need to make sure that you put all your music and movies on the spinning hard drive...

People just want their GBs and GHz. Start talking 4K random IOPS and you can actually see their eyes glaze over.




RE: Source?
By Taft12 on 4/19/2011 12:08:11 PM , Rating: 2
You're absolutely correct - I don't think competition from SSDs has anything to do with whether a 500GB desktop drive costs $40 or $60. That's purely competition in the rotational drive space (which got a whole lot less competitive over the past couple weeks)

OEMs like Dell and HP move most of the consumer hard drives in the market, and only their very-high-end (and very-low-volume) products have SSDs. SSD's have a long way to go before they can be considered mainstream. It's still several years away based on information that the cost decreases will slow moving forward


Seagate owns everybody
By deathwombat on 4/19/2011 1:40:24 PM , Rating: 2
Seagate now owns the hard drive businesses of Conner, Quantum, Maxtor, and Samsung. That's a lot of recognizable brand names. I hear they're announcing the new Barracuda Spinpoint DiamondMax Fireball ProDrive.




RE: Seagate owns everybody
By Azethoth on 4/20/2011 4:12:21 AM , Rating: 2
V1.8 Quantum Gold


What about future HDD prices...
By RdBiker on 4/19/2011 9:03:59 AM , Rating: 2
I dunno if this is good for future HDD prices. They've declined very quickly in the past but if we have just a few big players that's probably at least going to slow down a bit.
I just hope the SSD (and NAND) manufacturers aren't going to start merging since there aren't too many of those either.

BTW 1.375B seems to be a bit under the rumored 1.5B so apparently Seagate was quite willing to purchase them out. Does Samsung have any SSD related stuff coming up or is this just about the old HDD business - and the possibility to get better access to Samsung's newest NAND?




By amanojaku on 4/19/2011 10:01:42 AM , Rating: 1
quote:
Samsung is looking to sell the unit for $1.5 billion, but it may consider a deal under $1 billion, the person said.
If you ask me, Seagate paid too much. You just announced the unit is up for sale and you're already willing to consider a deal under $1B? That's ONE THIRD OFF of what you're hoping to sell for! Seagate should've paid $1.1-1.2B, but whatever. This deal is purely about Samsung's HDD business, but I'm sure Seagate will work out a deal for other tech as it is building its enterprise SSD business.

As to HDD prices, I'm not to certain they will go up. We have been used to cheap drives for a while; if the prices go up we'll just buy SSDs. And most of the decent SSDs come from companies OTHER than Seagate, Toshiba, and WD.


*facepalm*
By quiksilvr on 4/19/2011 8:55:45 AM , Rating: 2
It's not an "alliance" if one side is paying the other billions of dollars. It's clearly a buyout and they are trying every OTHER word in the book to try to convince people otherwise.




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