Seagate soaks up rival with billion dollar deal

Digital storage giant Seagate is to acquire rival vendor Maxtor in a US$1.9 billion deal — and will create a new global hard drive powerhouse in the process.

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By  Chris Whyatt Published  January 1, 2006

Digital storage giant Seagate is to acquire rival vendor Maxtor in a US$1.9 billion deal — and will create a new global hard drive powerhouse in the process. Following press speculation in the US, the hard disk vendor confirmed it had entered into a definitive agreement to purchase storage specialist Maxtor in a stock-based transaction, last month. The move signals further consolidation of the global hard drive market, which is now primed to be dominated by three major players: Western Digital, Hitachi GST and the combined Seagate-Maxtor. “Seagate is excited about the opportunity to achieve greater scale, reduce supply chain costs, and leverage combined R&D (research and development) efforts across a broader product set,” said Bill Watkins, Seagate CEO. “With the increased scale of the combined company, we can reduce overall product costs and provide more innovative products at more competitive prices,” he added. “This transaction has significant strategic and financial benefits, and the combined company will be better positioned to anticipate and serve the needs of the global customer base in the highly competitive data storage market,” he went on to add. Under the terms of the deal, Seagate shareholders will own 84% of the combined company with Maxtor shareholders owning the remaining 16%. For Seagate, the acquisition is being viewed as a chance to utilise its manufacturing infrastructure to make Maxtor’s disk drives at a lower cost. The combined company is anticipating greater revenue opportunities and it expects to achieve approximately US$300 million of annual operating expense savings after the first full year of integration. The deal is expected to close in the second half of the year.

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