IBM and Hitachi announced they are to combine their hard disk businesses into a single company. The yest to be named new company will be based in San Jose, California, where IBM’s disk development and engineering offices are located. Both companies will contribute executives and employees. Terms of the deal were not disclosed, but Hitachi is expected to have a 70% stake in the joint venture, and make a payment to IBM for its hard disk drive (HDD) assets.
The deal is subject to regulatory approval in the US, and possibly Japan. IBM has around 15,000 employees in its HDD business, at plants in Singapore, Thailand Japan, Hungary, Germany, Mexico and Hungary. The company has not determined whether all employees will move to new venture.
Commenting on the deal, Yoshiro Kuwata, Executive Vice President and Director of Hitachi said: Strong hardware is essential to our company-wide efforts to enhance solutions operations, by bringing together the world-class HDD research and development capabilities of Hitachi and IBM, the joint venture should expand the market for new digital appliances and more quickly bring to market advanced product offerings.
Nick Donofrio, IBM’s senior vice president of technology and manufacturing, said the venture was aimed at cutting costs through large-volume production.
Size is the answer, Donofrio said. We’ve got the technology and the people. We’ve got to get an economy of scale. Merging these businesses will give us the size we’re looking for.
Hitachi’s annual revenue in the HDD business is still relatively small at about $760 million. Annual revenue of the new joint venture with IBM is expected to be around $3.8 billion to $4.6 billion.
Hitachi and IBM are to announce further details of the alliance at a later date. The two companies have an established history of business cooperation, and have recently conducted joint development and manufacturing activities in server operations.