CORP TALK: Toshiba Corporation and Fujitsu Limited reached an agreement to transfer Fujitsu’s hard disk drive (HDD) business to Toshiba with the aim to complete the transaction in the fiscal first quarter of 2009. Toshiba will acquire an estimated 80% stake in a new subsidiary within Toshiba, while Fujitsu will hold the remaining 20% over some time to ensure a smooth transition.

With the transfer of Fujitsu's HDD business into its fold, Toshiba's goal to become a leading storage provider in the 2.5-inch space will be further boosted after it announced a half-terabyte (512GB) 2.5-inch SSD hard drive in December 2008.

According to the MOU, Fujitsu will transfer its HDD design, development, manufacturing, sales and all other functions to Toshiba, except Fujitsu’s HDD head and media businesses. The transfer also includes HDD manufacturing subsidiaries in the Philippines (FCPP) and Thailand (FTC), and HDD sales and marketing offices outside Japan.

David Chieng, Editor, HWM Singapore

David (HWM SG): Hard disk drives are notoriously low margin businesses from the retailer point of view; and even more so when it comes to the manufacturer, especially since we’re seeing the total cost of storage dropping like a rock year on year. This is great for the end user, but not so good for the manufacturer, making competition extremely intense. After all, Seagate bought up Maxtor not too long ago, leaving the desktop hard disk drive market dominated by Seagate and Western Digital.

In the small form factor hard disk drive space however, there is still room for growth. Laptop usage has skyrocketed in the past year, compounded by the sudden popularity of the mini-notebook platform, increasing demand for all things laptop related, storage included. For Toshiba, acquiring Fujitsu means that the company now has a foot in the enterprise storage segment, not to mention capacity to further innovate in the solid state storage space.

Paolo Manzano, Managing Editor, HWM Philippines

Paolo (HWM PH): This is not so much about the ubiquitous desktop HDD space or external storage market. It’s about consolidation in the storage market for the manufacturers of storage for devices such as notebooks, PMPs, and other media devices. The unseen bits and pieces.

This is a space that is nevertheless relevant for manufacturers as it is an ever increasing space and demand is on the upsurge. Nevertheless, it is a challenging business as the impetus to innovate at a rapid pace is of utmost importance in order to maintan relevance and a competitive edge, which leaves room for only a select few players.

HWM Indonesia

HWM Indonesia: In the past decade, the HDD industry has been consolidating. Manufacturers have either merged or acquired other manufacturers.

The slim margin per GB has made the industry very competitive, thus making the industry smaller to accommodate too many players. The consolidation is a good thing, to the players as well as to the end users. To the players, they can reach better economies of scale. To the end users, pricing will be more attractive with the greater economy of scale.

In this case, Fujitsu is very smart holding on to the head production side of business. This will make sure Fujitsu still has revenue flow from the HDD business, despite having sold the manufacturing side to another party.