September 01, 2011, 5:16 PM — In March, Western Digital agreed to buy Hitachi Global Storage Technologies (HGST), the disk drive subsidiary of Hitachi Ltd., in a stock and cash transaction valued at $4.3 billion. HGST CEO Steve Milligan will join WD as president at the closing of the deal, expected in the fourth quarter.
Western Digital is the leading supplier of hard disk drive technology, controlling about 31% of the market, followed by Seagate Technology with 29%. HGST's business represents about 18% of total hard drive units shipped, according to market research firm iSuppli. The combined firm will handily dominate the market.
The buyout will give Western Digital, a company focused mostly on the consumer external hard drive segment, a greater foothold in the data center. Milligan and Brendan Collins, HGST's vice president of product marketing, spoke to Computerworld about the post-closing future.
Where does HGST's future lie? Milligan: HGST was started back when Hitachi acquired IBM's disk drive business in 2002. Unfortunately, it had not been successful from a financial perspective ... it incurred a substantial amount of losses. As the disk drive industry got more cost competitive [IBM] felt they couldn't compete effectively. That was the business we inherited.
The thing we recognized was that data storage requirements were going to increase. The only question was: Where was that data going to be stored and where was the opportunity to make money and come up with unique solutions that allow our customers to be successful? We saw a huge opportunity in terms of two things -- the build out of the cloud ... and mobility. Those two things work together.
Hard drives appear to be dead in the mobile market. Where do you see a future for 7mm disk drives in mobile devices. Collins: Well, I wouldn't say for a second that it's dead. I think you need to look at the use of our 7mm drives in several markets -- notebooks ... smaller set top boxes ... and portable storage.
If you look at the biggest market --the notebook market -- and look at client SSDs versus hard drives, even three to five years from now, SSDs will be less than 10% of the mix. You'll probably see a combination including hybrid drives that blend flash and hard drives.
If you look at the [drop in cost] of flash and hard drives, we're both on a similar trend. We're on roughly a 25% [cost per gigabyte reduction annually] in both MLC flash and hard drives. So the gap really isn't closing. You're going to see both of those offerings continue to exist for quite a while. And, most of our big [systems equipment manufacturers] agree with that.