Realignment
We covered the rumour that Samsung was looking to offload its HDD business yesterday and it has duly come true. The most likely acquirer at the time seemed to be Seagate, and that has proven the case, but it's a bit more complicated than a simple acquisition.
Yes, Seagate is handing over $1.375 billion to Samsung for its HDD unit, but there are also was lot of other bits of coopreration between the companies on the matter of disk drives in what is being positioned as a ‘broad strategic alignment'.
There's also an agreement for Samsung to supply Seagate with the NAND Flash for its enterprise SSDs, and a reciprocal agreement that Seagate will supply disk drives (presumably HDDs) to Samsung for use in its PCs and consumer electronics. There are also various other agreements to help each other out, including patent cross-license agreements.
The $1.375 billion payment is comprised of half cash and half stock. Stock to the value of $687.5 million apparently amounts to 9.6 percent percent of Seagate. This is enough to get Samsung a seat on the Seagate board.
"We are pleased to strengthen our strategic relationship with Samsung in a way that better aligns both companies around technologies and products," said Steve Luczo, Seagate chairman, president and CEO. "With these agreements, we expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers, while facilitating our long-term relationship with Samsung."
"Delivering value to the market and consumers is the primary goal of the extensive agreement announced today. Samsung looks forward to extending our existing strategic ties with Seagate, to deliver creative technology solutions for a broad diversity of consumer, business and industrial applications," said Oh-hyun, Kwon, president of the semiconductor business of Samsung Electronics.
The deal is expected to close by the end of this year.
