Toshiba Grabs Fujitsu's HDD Business In Mobile, Enterprise Play

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Toshiba and Fujitsu, both based in Tokyo, said they have signed a memorandum of understanding to transfer Fujitsu's hard disk drive business to Toshiba.

They expect to complete the transaction in the first quarter of fiscal 2009. Financial details of the acquisition were not released. To facilitate the transfer, Fujitsu plans to move its hard drive-related businesses along with its hard drive design, development, manufacturing, sales and other functions into a new company. The deal includes Fujitsu hard drive manufacturing subsidiaries in the Philippines and Thailand.

Toshiba plans to acquire about 80 percent of the new company and make it a Toshiba Group subsidiary. After an as-yet-unspecified time, Toshiba plans to acquire the remaining 20 percent and make the new storage company a wholly owned subsidiary of Toshiba. For Toshiba, the move gives it an opportunity to reinforce its position as a leading vendor of 2.5-inch and smaller hard drives used mainly in notebook PCs, mobile devices, automotive and consumer electronics. Fujitsu also gives Toshiba an entry into the enterprise hard drive market with drives for servers and data storage systems.

In addition, the acquisition lets Toshiba combine its NAND flash memory technology with Fujitsu's enterprise hard drive technology to help it grow its solid state drive (SSD) business, the two companies said in a statement.

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With the acquisition, Toshiba plans to increase its overall hard drive market share to more than 20 percent by 2015, Toshiba said.

Jayson Noland, an analyst with Robert W. Baird & Company, wrote in a research report Tuesday that the combined Toshiba/Fujitsu hard drive entity will be the mobile drive leader with an immediate market share of 25 percent to 30 percent.

However, wrote Noland, attrition due to the integration of the two companies' operations means it will lose some of that market share to Seagate, Western Digital and Hitachi GST. That loss should not be as severe as the loss in market share when Seagate acquired Maxtor, which resulted in a 50 percent revenue attrition, he wrote.

While Fujitsu will give Toshiba a foothold in the enterprise hard drive market, Noland wrote he does not expect meaningful changes in the market as a result of the merger.

The winners from the merger are likely to be storage vendors Seagate and Western Digital, who should see their mobile drive business increase, Noland wrote.