Analysts: Industry Impacts of Western Digital Acquisition of Hitachi Storage

March 8, 2011

On Monday March 7 Western Digital (WD) announced that the company had reached an agreement to purchase Hitachi Global Storage Technologies (HGST) for $4.3 billion in cash and common stock. The deal has already been approved by both companies’ boards and is expected to close in the third quarter assuming regulatory approval.

HGST’s parent Hitachi will retain a 10% stake in the combined company and HGST’s current CEO, Steve Milligan, will be president of the new business reporting to WD president and CEO John Coyne. The merger will impact the HDD industry including component and equipment suppliers and change the landscape for enterprise SSDs.

Biggest in HDDs

From a unit shipment perspective WD and HGST are the largest and third largest manufacturers of hard disk drives (HDDs). Today Seagate remains the revenue leader, thanks to the company’s dominance of the enterprise SSD market. The pending merger will push WD’s revenues ahead of Seagate’s.

WD is already the unit shipment leader, having surpassed Seagate’s unit shipments over a year ago. Combined unit shipments for WD and HGST account for nearly 48% of the world HDD market.

Hitachi GST was formed by the merger of IBM and Hitachi’s HDD units in 2003. After many years of losses HGST turned profitable for most of the last two years. Although the division is profitable, Hitachi was rumored to have been looking to divest itself of its HDD unit for several years. In 2010 and even in 2009 rumors reported that Hitachi was shopping for a buyer for the division with WD mentioned as one of the suitors. WD was also rumored to have been interested in Fujitsu’s HDD business before that company was acquired by Toshiba.

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Analysis: General Electric 500GB Holographic Disc Is Too Costly For Consumer Success

April 28, 2009
Holographic discs could be the technology after Blu-ray

G.E.'s holographic discs could be the technology after Blu-ray

Yesterday General Electric said it successfully developed a digital storage technology that will allow standard-size discs to hold the equivalent of 100 DVDs or about 20 single-layer Blu-ray discs.

G.E.’s holographic discs could hold 500 gigabytes of data, when Blu-ray stores 25-gigabyte to 50-gigabyte, and a standard DVD holds 5 gigabytes.

When this next-generation disc comes in 2011 or 2012, G.E. expects it will cost less than 10 cents a gigabyte. When Blu-ray was introduced in late 2006, a 25-gigabyte disc cost nearly $1 a gigabyte, and is about half that now.

Furthermore, as a reader pointed out, the $2,700 player price tag will also have to come down to the $200-$300 level before the technology gets any mass-market traction.

But for storage expert Tom Coughlin, of Atascadero, Calif.-analyst firm Coughlin Associates, 500 gigabytes might just not be enough with ultra-HD and 3D coming to your home soon.

Tom Coughlin is an expert in digital storage and organiser of the Creative Storage conference

Tom Coughlin is an expert in digital storage and organiser of the Creative Storage conference

Follows, Coughlin’s take on G.E.’s technology:

I think G.E.’s holographics will be useful for high resolution video content. For instance the ultra-HD format being promoted by NHK in Japan would have 8k resolution requiring about 16 times the storage capacity of a Blu-ray. Combined with 3D this could require at least 500 GB and possibly more.

The argument for physical distribution is that for high resolution content it will remain cheaper and faster to buy a disc than download the content.

Too costly for consumers

However, regarding the price I think it must ultimately be less than 10 cents a GB to be popular. At 10 cents a disc a 500 GB disk would cost $50 and I don’t think consumers would pay that price. I think the price of a disc must be less than $10 in volume (without any cost for the content). Note that Blu-ray has had to quickly discount their prices to increase demand for the new format.

But a higher capacity physical format at the right price point could be very attractive for future high resolution content distribution.

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Analyst: Hard Disk Drive Shipments Worst Decline Ever In 2009

February 4, 2009

Hard disk drive makers are in for a very very tough year.

According to Coughlin Associates, fourth quarter 2008 hard disk drive (HDD) shipments declined about 19% from the third quarter of 2008; an unprecedented Q3 to Q4 drop.

Total HDD shipments for 2008 were about 540 million units and could fall as low as 500 million units this year, on par with 2007 volume.

“There is more downside than upside ahead and as a consequence, HDD unit shipments in 2009 will experience their worst year over year decline ever. The total decline in HDD units in 2009 over 2008 will be between 5% and 9% with a decline of 7% being likely,“ writes Tom Coughlin, the principal analyst at Coughlin Associates.

However, the decline in HDD revenue could be much steeper, as HDD companies like Toshiba, Samsung, Seagate or Western Digital engage in an unprecedented price war for survival.

Looking ahead, Coughlin expects positive growth in 2010 and a full recovery by 2011, with annual unit growth in the 20% or higher range or higher, like in 2003.

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