Maxtor to acquire Quantum disk drive group

Maxtor Corp. and Quantum Corp.'s Hard Disk Drive Group, today announced that they will merge their disk manufacturing companies in what is believed to be the single largest such company in the world.

The merger is subject to regulatory and stockholder approval. If that happens, the companies will merge operations early next year. By eliminating some redundant positions and departments, they expect to save between $120 million and $200 million per year.

With the merger, the combined company, which will be known as Maxtor Corp., will have deals with the top 10 PC original equipment manufacturers, including Dell Computer Corp., IBM, Compaq Computer Corp., Hewlett-Packard Co., Apple Computer Inc. and Gateway Inc., and will provide drives for everything from portable devices and small-form-factor computers to storage systems.

The deal is worth an estimated $2.3 billion. Maxtor will trade 1.52 shares of its stock for each share of Quantum.

The two companies, both in Milpitas, Calif., will maintain their current manufacturing operations, Maxtor CEO Mike Cannon and Quantum CEO Michael Brown said. Cannon will be president and CEO of the new company. Brown will join the company's board of directors.

Quantum HDD is a division of Quantum Corp. Quantum's DLT and Storage Systems Group will separate and form Quantum Corp.

John Webster, an analyst at Illuminata Inc. in Nashua N.H., said the merger may or may not form the world's largest disk drive manufacturer, but that is not the most interesting aspect of the announcement.

"What the new Quantum does now without the disk drive business will be interesting to watch," he said. "I'm curious to see how they move forward." The two divisions that will constitute the new Quantum do not have a "clear affinity," he said.

The companies have staked out a position as a targeted niche vendor, which means Quantum is drastically changing its original focus as a parts manufacturer. "Maxtor now, I think, clearly plays in the components space along with some infrastructure," Webster said. "Quantum, on the other hand, clearly played in both camps."

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