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By | Joe Fay 19th April 2011 10:24

Seagate sucks up Samsung storage biz

Pays $1.375bn to boost market share to 40 per cent

Seagate is taking over Samsung's hard disk operation, in a deal that will give the Korean giant almost 10 per cent of the erstwhile storage market leader.

The deal had been expected, with Seagate CEO Stepehn Luczo having already cleared his calendar for a mysterious three-month sojourn in the Far East.

The combined business will take around 40 per cent of the worldwide HDD market, making it a much weightier counter to Western Digital/Hitachi GST's 50 per cent.

Under yesterday's deal, Samsung will "combine" its HDD business into Seagate's, extend the firm's patent agreements, and provide NAND flash to Seagate.

At the same time, Samsung will take Seagate drives for its PC, notebook, and crucially perhaps, consumer products.

In return, Samsung gets the equivalent of $1.375bn from Seagate, half in cash, and half in Seagate stock. The stock element amounts to 9.6 per cent of Seagate's equity, and is enough to earn Samsung a seat on Seagate's board.

Seagate said the deal will significantly expand its business in China and Southeast Asia. Presumably Luczo's Asian holiday will include a significant amount of handshaking with customers.

The deal was flagged yesterday by the Wall St Journal. Samsung had wanted as much as $1.5bn for the business, but it was thought it would settle for less than $1bn. As it is, it has gained a little more than that, albeit with an ongoing link to the hard drive business.

Seagate, for its part, may have paid slightly more than it would have liked, but will be hoping Samsung will lubricate its entry into China and other markets. ®

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