A New Spin on Storage - Seagate Takes a Giga-byte out of Maxtor
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In December of 2005, Seagate Technology LLC announced its planned acquisition of Maxtor Corporation. The $1.9 billion merger was completed in May of this year. With both companies having large market shares, this merger proves to be of very large magnitude leaving only Fujitsu and Hitachi as major global competitors. The smaller, independently owned, US-based Western Digital Corporation still owns a piece of that market, but their ability to compete against these larger conglomerates is limited.
Seagate has long dominated the hard drive industry. You can see in the figure above that Seagate had a strong lead, taking 29% of the global hard drive market share. They dominated the enterprise level market, stealing over 50% share there. It's this kind of market presence that led to Seagate being named 2006 Company of the Year by Forbes Magazine. However, Maxtor was no small contender in the first quarter either. They finished up with a sizable 11.9% market share, proving they're a force to be reckoned with as well.
This chart simulates the same First Quarter 2006 and combines Seagate and Maxtor into a single share. This simulates the merger of the two companies taking a staggering 41.9% of the global market. Seagate's nearest contender would be Western Digital with a measly 18.5%! This presents many industry analysts with a reason to worry. Some fear that this size market share could drive consumer prices higher since there is relatively little in the way of competition, while others argue that the combination of forces would result in lower costs that would allow them to drive consumer prices lower. Still others believe that it will only help to stabilize prices at their current level, but even that would have potential benefits to consumers. As Steve Berg, senior analyst with Punk, Ziegel & Co. pointed out, "It'll be much easier for planning capital spending and budget forecasting."
Next: What the merger means... >>
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