Seagate buys Samsung's hard drive division

Seagate and Samsung have announced a strategic partnership that will see Samsung's hard disk operations folded into Seagate, while the latter will gain access to Samsung's memory chips for use in solid state drives (SSDs) and other products.

The announcement continues the consolidation trend in the storage industry, which has already seen Western Digital snap up rival hard drive maker Hitachi GST earlier this year.

The deal is expected to close by the end of this year, and is said to be worth about $1.375bn in the form of Seagate stocks and cash that will be paid to Samsung.

In exchange for its hard drive business, Samsung also gets a Nand Flash agreement under which it will provide Seagate with components for use in SSDs and hybrid drives, which combine a conventional hard drive with some Flash memory for better performance.

Seagate will also supply hard disks to Samsung for its PC products as part of the deal, while the two firms are extending their patent cross-licensing agreements.

The two companies inked a deal last year to jointly develop and cross-license SSD technology.

Seagate and Samsung issued a statement declaring that the move will enable them to better align their respective roadmaps and product development efforts, and bring products to market quicker.

"With these agreements, we expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers," said Seagate president and chief executive Steve Luczo.

Clive Longbottom, of analyst firm Quocirca, suggested the move shows that Seagate is keen to keep pace with Western Digital after its Hitachi acquisition, while Samsung gets to divest itself of a division that is not central to its main business.

"What will have to be seen is how well such a complex arrangement can be worked through, and how binding the agreements are," he said.

"For example, if Seagate develops a really good drive for a laptop, will Samsung be able to claim a period of exclusivity on it, or will it be an open market?"