Toshiba Corp. and Fujitsu Limited on Tuesday announced that they have signed a memorandum of understanding (MOU) on the transfer of Fujitsu's hard disk drive (HDD) business to Toshiba. The companies plan to conclude a transfer contract at an early date, and aim to complete the transaction in the first quarter of fiscal 2009.

Under the MOU, Fujitsu will transfer to Toshiba its HDD design, development, manufacturing, sales, and all other functions currently carried out by Fujitsu and Fujitsu Group companies, with the exception of Fujitsu's HDD head and media businesses.

Fujitsu will facilitate the transfer by bringing its HDD-related businesses and functions together in a new company. Toshiba will acquire about an 80% stake in this company and make it a Toshiba Group subsidiary. In order to promote a smooth transfer, Fujitsu will continue to hold a stake of under 20% in the new company for a certain period of time, after which it will become a wholly owned subsidiary of Toshiba. Financial terms of the deal were not disclosed.

The consolidation of the two companies' HDD businesses will enable Toshiba to reinforce its already strong position as a leading vendor of small form-factor HDDs (2.5” and smaller HDDs) and will also give Toshiba entry into the enterprise HDD market for server and data storage system applications. Toshiba aims to build its position in the enterprise market to meet expected growth in demand for data storage systems.

Going forward, Toshiba aims to build on the consolidation to raise its share in the overall HDD market to over 20% by 2015. Toshiba’s HDD market share in 2008 was 8.7%, meanwhile, Fujitsu’s unprofitable hard drive business unit shipped 7.3% of HDDs; which means that with the acquisition Toshiba will control shipments of 15% - 16% hard disks worldwide, just a couple percents less compared to Hitachi Global Storage Technologies.

“The acquisition will help Toshiba secure the market share necessary to survive continuing consolidation in the crowded disk-drive market,” said Yuichi Ishida, an analyst at Mizuho Investors Securities, reports Bloomberg news-agency.

Entry into the enterprise business will allow Toshiba to further enlarge its solid state drive (SSD) business by developing SSD products for servers and enterprise storage systems, fusing Toshiba's NAND flash memory technology with Fujitsu's enterprise HDD technology. This move is expected to spur expansion of the rapidly expanding SSD market.

By taking advantage of the integration of Fujitsu's HDD businesses, Toshiba also aims to strengthen collaboration with HDD parts suppliers and to promote cost reductions and the development of new technologies.

Tags: Toshiba, Fujitsu