Seagate, Western Digital merger deals face EC probe

A consolidation in the hard-drive market has raised competition concerns from European regulators

Moves by Seagate and Western Digital to acquire hard-drive companies are being probed by European regulators because of "competition concerns", the European Commission said on Monday.

The proposed acquisitions will "further reduce competition", the EC said in a statement citing concerns about a significant consolidation in the hard-drive market.

"Hard drives are the backbone of the digital economy," Joaquin Almunia, vice president of competition policy at the European Commission, said in the statement. "The Commission will carefully examine if effective competition is preserved and innovation encouraged."

Western Digital said in March it would acquire Hitachi's hard drive business for US$4.3 billion. Competitor Seagate said a month later it would acquire Samsung's hard drive business for $1.38 billion.

Seagate and Western Digital are currently the top two hard-drive vendors in the market, according to market research firm IHS iSuppli.

Western Digital's acquisition of Hitachi's hard-drive business could make it the largest hard-drive vendor with about 50 percent of the worldwide market, according to iSuppli. Seagate's acquisition of Samsung's hard-drive operations could give the combined company a 40 percent market share, said Fang Zhang, an iSuppli analyst, in a blog entry in early May.

The remaining market share would belong to Toshiba, which in 2009 acquired Fujitsu's hard drive business.

The Commission has until Oct. 10 to determine whether the transactions impede competition and are detrimental to business customers and consumers. The investigation of the proposed transactions will include a look at whether the deals could affect pricing and supply of hard drives. The merger deals with be assessed separately, the EC said.

Western Digital is proceeding with plans to complete the acquisition of Hitachi's hard drive business, the company said in a statement. The acquisition is now expected to close in the fourth quarter of this year, a postponement from the planned closure in the third quarter that the company announced in March. Seagate did not immediately respond to a request for comment.

The hard-drive market is slowing down as sales of flash storage and solid-state drives grow. Hard-drive sales totaled $27 billion in 2010, and are expected to grow by 4.1 percent to $28 billion this year, according to iSuppli. Hard drive sales will grow, albeit at a slower pace, through 2015, it said.

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