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Seagate-Maxtor completes

Hard drive vendor Seagate has completed its acquisition of rival vendor Maxtor. The combined entity will retain both sets of product lines for the foreseeable future with Middle East management claiming that the enlarged company will look to start streamlining and integrating its channel structures in September 2006 at the earliest.

Hard drive vendor Seagate has completed its acquisition of rival vendor Maxtor. The combined entity will retain both sets of product lines for the foreseeable future with Middle East management claiming that the enlarged company will look to start streamlining and integrating its channel structures in September 2006 at the earliest.

The bulk of the overall integration process Seagate and Maxtor is forecast to be complete by early 2007 with Seagate setting an earnings per share accretion target of between 10% and 20% after the first year of combined operations.

“This is an exciting time for Seagate and for our industry,” said Bill Watkins, Seagate president and CEO. “The demand for storage is at record levels globally and is continuing to grow. The past twenty years was about digitising the workplace; the next decade will be focused on digitising your lifestyle. As a result of this acquisition, we believe Seagate has the enhanced scale and capacity to better drive technology advances and accelerate delivery of a wide range of differentiated products and cost-effective solutions to a growing customer base.”

Dave Wickersham, executive VP and COO, added: “Our integration teams have made excellent progress on addressing customer requirements, continuity of supply, the optimisation of manufacturing and production capacity, and workforce planning. As a result we have an opportunity to substantially complete our integration plan in six to nine months.”

Brian Dexheimer, executive VP, global sales and marketing, commented: “We are encouraged by the dialogue we've had with customers and are confident that the combined company will deliver more compelling products and services more efficiently to them. Our integration plan is designed to ensure revenue retention by executing a seamless transition to Seagate products for Maxtor customers and by continuing to meet the product, supply, quality and cost demands of our total combined customer base.”

Seagate estimates that approximately half of Maxtor’s global workforce will be offered positions within the enlarged company with the bulk of those jobs concentrated on manufacturing operations in the Asia Pacific region. Seagate had also pledged to retain the full range of Maxtor branded retail solutions.

In terms of routes-to-market, Maxtor currently uses both Tech Data and eSys as global distribution partners and has also signed up FDC and Almasa as regional distribution partners in the Middle East. Delta has been brought on board as a retail-focused distributor for the UAE, with Jarir taking on a similar role in Saudi Arabia. Over in Egypt, MAS is pushing both internal and external drives for Maxtor and Sahara’s operation in South Africa is doing the same across the African continent.

Seagate, in contrast, has Asbis, Logicom and Mindware as its regional distribution partners in the Middle East. Like Maxtor it too has agreements in place with both eSys and Tech Data as well. Over in Africa, Seagate is currently working with Storgate in South Africa.

Tech Data and eSys both look safe. Both distributors have global relationships with Seagate and Maxtor. Seagate has so far made no real progress pushing retail-focused products to market in the Middle East. Bearing this in mind, both Jarir and Delta will also be feeling confident that their channel role remains assured. In fact, it would not be a surprise to see the combined Seagate-Maxtor entity extending these relationships or even appoint more focused retail distribution partners in the region.

The real potential for channel conflict appears to lie in the regional distributor category where Seagate partners Asbis, Mindware and Logicom line up against Maxtor’s dream team of Almasa and FDC.

However, even for distributors such as Tech Data and eSys, the merger raises issues about the levels of credit that the enlarged Seagate entity will extend. It is doubtful that the single credit line on offer will match the combined amount these distributors were receiving when working with both Seagate and Maxtor as separate entities.

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