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 Western Digital 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.
Milligan: I think you're correct in that there are alternative devices that are consuming data and utilizing flash memory, as opposed to notebook devices that may be using hard drives.
We've really tried to run hard towards the cloud. If we were to sit back and say our growth opportunity is in traditional compute platforms that use hard drives, we would be wrong. Are there still growth opportunities there? Yes. Is it more muted than in the past? Yes, because of alternative devices consuming all this data. So where we really see the value creation ... is the evolving storage ecosystem that's been moving to the cloud.
Will notebooks even be around in five years with tablets growing the way they are? Collins: If you look at emergence of edge devices, which would include smartphones and iPads, you cannot put all your photos or your music on there. You tend to put it on there temporarily, which means mass storage device tends to be somewhere else. These [smartphones and tablets] tend to be complementary devices, not displacing primary storage devices like notebooks and desktops. It has clearly had an impact on the growth of notebooks, but they will continue to co-exist.
If someone were to ask me, "Are you threatened by smartphones; are you threatened by tablets?" My answer would be no. All of those drives have a greater need for data. All those things that drive a greater need for data are good for us fundamentally as an industry. Still, the preferred option for mass storage is rotating magnetic storage. All that data has to be somewhere. There's going to be a big fat drive out there somewhere storing all that stuff.