Western Digital to Buy Hitachi's Hard Drive Sector

No pun intended on the title (hard drive, bad sectors--bad joke? I know).

Yesterday, Western Digital announced that it would be purchasing Hitachi's hard disk drive (HDD) business for approximately $4.3 billion (in a mixed purchase of both cash and stock). Hitachi would own around 10% of Western Digital's stock after the transaction. This would make Western Digital, already the biggest manufacturer of hard drives in the world--an even bigger hard drive manufacturing giant.

A hard disk drive read/write head and platter.
Source: academic.ru

Currently, Western Digital has a market share of around 31.0%, right above Seagate's market share of 29.7%. After the purchase, Western Digital's market share of the hard drive market will shoot up to a staggering 50% or higher, according to forecasts. However, this brings in the question of whether or not Western Digital will be potentially monopolizing the hard drive industry. Antitrust issues may prevail unless the deal is approved by authorities and not found to damage competition in the market.

However, both Western Digital and Hitachi have stated that they expected the deal to go smoothly and to finish by the third quarter this year. Upon breaking of the news, Western Digital's stock rose by a sharp 16% to $34.68. For a stock that has been down more than 11% for the past year, such a rise is more than welcome by stockholders.

The top 5 main hard disk drive manufacturers, which will be reduced to 4 after the transaction between Western Digital and Hitachi.
Source: IHS iSuppli and The Wall Street Journal

Now that the 5 main competitors (Western Digital, Seagate, Hitachi, Toshiba-Fujitsu, and Samsung) have been reduced to 4, what does this mean for the market as a whole? For one, the competition is probably going to heat up rather than getting reduced. With hard drive prices tumbling over the past decade and the advent of portable tablet computers which rely on static memory (see my SSD drive post), R&D may be the only way to lead a market already saturated with products offering nearly the same performance across the board.

It is clear that with this purchase, the future of hard disk drive costs, performance, and value will be altered significantly. Additionally, with a worldwide cap of neodymium by China (which controls harbors roughly 90% of the world's neodymium--a rare earth magnetic metal which is used in everything from hybrid vehicles to hard drives), new technology will almost become necessary in order to keep prices at bay.

Let's just hope that quality control remains the same across the board with all hard disk manufacturers as demand increases with more tablets, PCs, and laptops being manufactured and shipped around the world.