JAPANESE ELECTRONICS GIANT Toshiba has signed an agreement with Western Digital to buy part of its hard drive business to appease regulators in Western Digital's bid to complete its purchase of Hitachi's Global Storage Technologies (HGST).
Western Digital is finishing up a deal to buy HGST but has run into regulatory problems as the move would leave the industry with two very large hard drive firms, Seagate and Western Digital, and Toshiba a very distant third. Western Digital's plan to solve this problem is to flog a part of HGST's business to Toshiba while buying Toshiba Storage Device Thailand (TSDT).
Toshiba's acquisition will mean it will be able to produce 3.5in hard drives for the desktop, nearline server and consumer electronics markets. At present Toshiba is best known for its 2.5in laptop hard drives but this move, which is also pending regulatory approval, will significantly enlarge the firm's product range.
For Western Digital, the value in the deal is access to TSDT, which hasn't restarted production since the devastating floods in Thailand. Western Digital said that should the deal go through, TSDT's facilities and employees will become part of the firm's Thailand operations, meaning it is expecting to benefit from economies of scale.
On the face of Western Digital's deal, it would seem Toshiba is getting more out of the trade. The problem is that the hard drive business isn't about the number of products but big volume sales in order to overcome tiny margins on each unit. In that sense Toshiba has to do a lot more than just get the go-ahead to make 3.5in hard drives if it wants to spin a profit.
Western Digital said its deal with Toshiba should should go through in March, pending regulatory approval. µ