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Seagate to pay $1.9 billion for disk drive maker
2005-12-22
Seagate Technology, the giant digital storage company, agreed to acquire a rival, Maxtor, for $1.9 billion in stock, the companies announced Wednesday. Seagate's acquisition comes as the market for digital storage is booming. Corporations and individuals are saving vast numbers of files that are ever increasing in size, especially with the rising number of audio and video files. Still, the disk drive market - which has been on a faster technology track than the microchip world as measured by the rate of increase of storage density - has been brutally competitive. Under the terms of the deal, Maxtor shareholders will receive 0.37 share of Seagate stock, the equivalent of $7.25 a share. That is a 60 percent premium over the price of Maxtor's shares, which closed Tuesday at $4.52. When the deal is completed, Seagate investors will own about 84 percent of the combined company and Maxtor shareholders about 16 percent. For Seagate, the deal is not about filling a gap in its product line but rather is a gamble that it can utilize its manufacturing infrastructure to make Maxtor's disk drives at a lower cost. The transaction also fortifies Seagate's dominant position, but may raise questions among investors. Seagate, which was founded in 1979 and which was the first maker of hard disks for personal computers, has become an industry leader by pushing quickly for smaller drives and into new storage technologies. But Maxtor lost money in four of the five most recent quarters and two of the last three years. The most significant challenge for Maxtor, based in Milpitas, California, is that it has not been a factor in the market for mobile disk drives, which are used in portable computers and in MP3 music players like Apple's iPod. Hitachi has been the leader in that market, followed by Seagate.... ... | Note: this page has been archived under Muzi Premium Version and is only available to premium members. Please use the Premium Personal Password (PPP) to log in.
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