Seagate Eyes Samsung's Hard Drive Business: Report

Seagate may be in the process of acquiring the hard drive business of Samsung, a deal which, if finalized, would leave the storage industry with only three primary hard drive vendors.

The Wall Street Journal on Sunday reported that Samsung is looking to sell its hard drive business for between $1 billion and $1.5 billion, and that Seagate is the most likely potential buyer.

Samsung is the industry's third-largest vendor, with a 10.3 percent share of total worldwide hard drive shipments, according to financial analyst firm Stifel Nicolaus.

However, according to The Wall Street Journal, Samsung's hard drive business is a money-losing operation, and Samsung would like to sell it and use the proceeds to invest in more promising parts of its business.

Should Samsung want to sell its hard drive business, Seagate would be the most likely buyer, the report said.

Should the deal go through, it would be the latest in a string of acquisitions that have rolled the hard drive industry into four major players from a peak 85 vendors in 1985.

At the top of the market is Western Digital, which in March said it plans to acquire Hitachi Global Storage Technologies (Hitachi GST) in a $4.3 billion deal.

Should that deal close as expected in the third quarter of 2011, it would leave Western Digital with a combined market share of 48.7 percent, based on 2010 shipment shares according to Stifel Nicolaus.

Hitachi GST is itself the result of a merger of the hard drive businesses of Hitachi and IBM after the two agreed in 2002 to combine their efforts in a joint venture.

More recently, Toshiba and Fujitsu in 2009 concluded an agreement to transfer Fujitsu's hard-drive business to Toshiba, creating the world's largest manufacturer of mobile drives.

Seagate has long been the leading hard drive manufacturer in terms of volume. However, Western Digital in 2010 for the first time took the top spot in the category of hard drive shipments from Seagate, according to analyst firm iSuppli.

A deal between Seagate and Samsung would bring two companies with fairly complementary businesses into one.

Seagate and Samsung are currently working together to develop solid state drives (SSDs), which happens to be one of the fastest growing parts of the IT industry.

Aaron Rakers, an analyst with Stifel Nicolaus, wrote in a research brief on Monday that, while the Western Digital-Hitachi GST acquisition might take up to 12 months before regulatory approval is received, a possible acquisition of Samsung's hard drive business by Seagate would be easier to approve as Samsung has no enterprise hard drive business.

Should the Seagate-Samsung deal go through, it would leave the hard drive business with only three primary vendors.

Western Digital-Hitachi GST would lead the market based on their combined market share of 48.7 percent in terms of drives shipped, followed by Seagate-Samsung at 40.3 percent and Toshiba-Fujitsu at 10.9 percent, according to Stifel Nicolaus, citing 2010 shares.

However, those market shares are subject to change as merged companies could consolidate manufacturing and production lines and eliminate duplicate products.

Both Seagate and Samsung declined to comment on The Wall Street Journal.