Samsung Electronics will sell its hard-disk drive operations to Seagate Technology in a $1.375 billion deal that will create strong links between the two companies, they said Tuesday.
The deal stands to solidify Seagate’s position as the world's second-largest maker of hard disk drives and comes less than a month after market leader Western Digital said it would buy Hitachi GST. If both deals go through, the hard disk drive market will have just three players by the end of the year, the other being Toshiba.
Seagate will pay around $1.375 billion for Samsung’s hard-disk operations, half in cash and half in Seagate shares.
The companies expect to complete the deal by the end of 2011, at which time Samsung will own around 9.6 percent of Seagate. It will also get to nominate a member to Seagate’s board of directors.
In addition to the transfer of the hard disk drive business, the two companies will expand an existing patent cross-licensing agreement and collaborate on development of enterprise storage systems. Samsung will supply flash memory chips for use in Seagate’s solid-state drives and Seagate will supply disk drives for use in Samsung's PCs, laptops and consumer electronics products.
Seagate said the deal will give it better access to potential customers in China and Southeast Asia, and a steady supply of flash memory chips for its expanding range of solid-state drives. It should also mean faster development cycles for both companies, according to Seagate.