It's official: Samsung Electronics will sell its hard disk drive business to U.S.-based Seagate Technology, in a move that will help the company focus on more profitable areas such as next-generation displays, NAND chips and solar cells. As part of the 'broad strategic alignment' announced this morning, Samsung will get $1.375 billion in cash and stock for combining its hard disk drive operations into Seagate, receiving equity ownership of about 10% in the world's second largest hard drive vendor and enhancing the current patent cross-license agreement between the two companies.
In addition, the companies will enter into a NAND flash memory supply agreement under which Samsung will provide Seagate with its NAND flash memory chips for use in Seagate's enterprise SSDs, solid state hybrid drives and other products. Likewise, Seagate will supply disk drives to Samsung for PCs, notebooks and consumer electronics.
The two companies will reportedly also co-develop new enterprise storage solutions, and a Samsung executive will be nominated to join Seagate's board of directors in the near future. The deal is expected to close by the end of 2011.
The move comes as the hard disk drive industry is going through a consolidation process, with Western Digital announcing plans to buy Hitachi GST for $4.3 billion – becoming a strong leader with about 50% of the total market. Should this and Seagate's acquisition of Samsung's HDD unit clear all regulatory hurdles it would produce two nearly equally matched manufacturers with Toshiba taking the remaining 10% of the pie.
Fewer competitors may also give the industry some long-term price stability at a time they have been affected by constant price wars. Unfortunately, that's not something consumers will be too excited about.