In a bid to more efficiently manage storage business, three Japanese makers of hard disk drives (HDDs) want to create a giant joint-venture. If hard disk units of Fujitsu, Hitachi and Toshiba are combined, then the new company will be able to challenge Seagate Technology in terms of market share as well as in terms of technology leadership.
Hitachi Global Storage Technologies, the storage division of Hitachi, has never reported profitability after it was acquired from IBM several years ago. Fujitsu’s and Toshiba’s HDD businesses are focused on creating advanced hard drive for small form-factor and mobile applications, but given that miniature hard disk drives face tough competition with flash-based storage solutions, the market of mobile HDDs is unlikely to bring a lot of growth opportunities for the two Japanese companies.
The world’s third largest maker of hard drives, Hitachi GST, had been looking for ways to reform its money losing business, reports Cnet News.com. At present the company has several alternatives and it remains to be seen which of them will be chosen by the management.
One of the options is to sell control stake of the company to a private equity firm, which would restructure the business and then sell it off. In particular, it is claimed that Hitachi was in talks with Silver Lake, the investment firm that restructured Seagate Technology nearly half a decade ago. However, since Silver Lake is still associated with Seagate, the deal is under a huge question mark.
Another option is to form a hard disk drive joint-venture with other HDD makers in Japan – Fujitsu and Hitachi. This alternative may be a very likely one as it fits into the general global trend towards giant companies and will be very similar to recent happenings on the market of optical disc drives (ODDs). ODD industry players tend to merge between themselves to be more competitive. In the recent years Nec and Sony formed Optiarc company, Hitachi and LG formed HLDS (Hitachi-LG Data Storage), Toshiba created TSST (Toshiba-Samsung Storage Technology Corp.) joint-venture with Samsung Electronics and Liteon acquired BenQ’s optical drive business.
However, the combination of Hitachi, Toshiba and Fujitsu seems to be a combination for survival, not for growth. While the potential newly formed company would have rather high market share, about 33%, given that Toshiba and Fujitsu are concentrated on making mobile hard drives and compete against each other nowadays, the actual market share of the new company is more than likely to be lower than that. Still, the joint-venture between Fujitsu, Hitachi and Toshiba is projected to gain certain cost advantages, e.g., obtain platters and other components at a lower cost thanks to higher volumes.
Neither of the mentioned companies commented on the news-story.