Hitachi and IBM are to transfer their hard disk drive (HDD) operations to a new standalone company under majority Hitachi ownership.
The plans were originally announced in April as part of a larger storage relationship between the two companies.
Hitachi has agreed to purchase the majority of IBM’s HDD-related assets for $2.05 billion, which includes the transfer of IBM’s HDD-related intellectual property portfolio to the new organisation. Hitachi will initially own 70% of this new company and will make a series of fixed payments to IBM before assuming full ownership after three years.
The new company will be based in San Jose, CA, and managed by an independent team comprising executives from Hitachi and IBM’s existing HDD operations. The chief executive officer will be Dr. Jun Naruse, Corporate Managing Director of Hitachi, Ltd., formerly CEO of Hitachi Data Systems, and the chief operating officer will be Dr. Douglas Grose, currently general manager of IBM’s Storage Technology Division. Hitachi will select the new company’s board of directors, and IBM will not be involved in its operations.
The new organisation will bring together approximately 24,000 employees, about 18,000 from IBM and 6,000 from Hitachi, with major manufacturing operations at 11 locations around the world. Certain IBM HDD operations are not included in the deal.
Hitachi estimates the new company may deliver approximately $5 billion in sales in fiscal year 2003, and will target annual sales of $7 billion by fiscal year 2006. IBM and Hitachi have each agreed to multi-year HDD supply commitments from the new company.
Pending the completion of applicable regulatory processes, the deal is expected to close before year-end.