And then there were three

I see reports today that Samsung is looking to sell its hard drive business. Samsung is one of four companies left that manufacture computer hard drives, the others being Seagate, Western Digital, and Toshiba.

Hard drives aren’t a growth market any more, so the most likely suitors are one of the remaining three. Since Western Digital just bought Hitachi’s drive business, it probably won’t be them. They may not have the cashflow, and they probably don’t want the regulatory scrutiny that would go along with two acquisitions in rapid succession that make them suddenly nearly twice the size of Seagate. It’s more likely to be Seagate or Toshiba. I’d expect Seagate.
I don’t think many people even realized Samsung made hard drives. In my experience their drives are middle-of-the-road performers but reliable. They never went out of their way to market the drives, but they’re common inside brand-name PCs, and while you can’t buy the drives at retail, most computer stores sell them.

Hard drives won’t be disappearing overnight, but flash memory is the future. I suspect Samsung wants to sell its hard drive business while it still has some value so they can turn that money around and sink it into their SSD business. The $1-$1.5 billion asking price should be enough to build a fab, or it would potentially be enough to buy a controller maker if they wanted to up their profile in that realm and try to challenge Intel’s vertical integration.

I don’t think Toshiba will buy Samsung’s disk business. I think it more likely that Toshiba will try to sell its line in a year or two to one of the survivors. The only reason for Toshiba to stay in the disk business would be because they make 2.5-inch laptop drives and they make laptops, which theoretically gives them a slight cost advantage over competitors. But IBM was in the same boat a decade ago, and that didn’t stop them from selling their disk business. Toshiba and Samsung are a lot alike, and if Samsung doesn’t think it makes sense to remain in the disk business, Toshiba is probably thinking similar thoughts.

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