Western Digital just announced that they've entered into an agreement to acquire STEC for approximately $340 million in cash. Technically STEC will be acquired by HGST (Hitachi Global Storage Technologies), which was acquired by Western Digital a little over a year ago. STEC's main focus is enterprise SSDs so it makes sense to merge STEC with HGST as HGST already has ULTRASTAR enterprise SSD lineup, whereas there are currently no SSDs under the Western Digital brand.

This is a good move from both. STEC has been having financial issues for a long time and one of their biggest shareholders, Balch Hill Capital, has publicly said that the company should look for a buyer. STEC was one of the earlier players in the enterprise SSD market but over the past few years their revenue has constantly been declining, partly because the competition has gotten much tougher as companies such as Intel, Samsung and Toshiba have entered the market. Nowadays even getting a steady NAND supply can be hard if you don't own a fab and the NAND market is only going to get worse next year because manufacturers are currently seeking for higher profits instead of increasing volume. While Western Digital doesn't own a NAND fab, it definitely helps when you're backed up by a multi-billion dollar company with tons of purchasing power. 

For Western Digital the biggest motives behind this acquisition are the engineering talent and intellectual property: STEC has over 100 SSD-related patents and over 900 employees. HGST does have a joint-operation for SSD controllers with Intel and that operation will continue, but the acquisition certainly makes HGST more independent when it comes to SSDs and will allow them to strengthen their position in the market.

It will obviously take time before we'll see the fruits of this acquisition, but it's good to see Western Digital being more aggressive in the SSD front. Initially this acquisition will only impact the enterprise SSDs but it's possible that we'll see STEC's technology in Western Digital (or HGST) branded consumer SSDs too.

Source: WD Press Release

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  • sherlockwing - Monday, June 24, 2013 - link

    Looks like after Seagate enters the SSD market, WD is going to jump in as well. Reply
  • markwrob - Monday, June 24, 2013 - link

    WD already has a presence in the SDD market through HGST products, as the article noted. I wonder if the STEC acquisition is more about gaining more/better access to flash chip supplies that STEC had contracts for. As other articles point out, the market has the big players with flash fabs (Samsung Micron Toshiba Intel) then folks like WD, STX, and a raft of others without flash fabs. In the second group, the bigger your fistful of contracts, the better. Reply
  • HappyCracker - Monday, June 24, 2013 - link

    I believe STEC is also a large supplier of enterprise flash drives to companies like EMC. That means really good margins on the drives compared to the consumer grade line. Reply
  • milehigh53366 - Thursday, July 04, 2013 - link

    Actually STEC had not sold any drives to EMC for quite some time. They got famous for a one time buy from EMC. STEC has been in hot water from investors for a long time and their chairman was investigated by SEC. STEC really has no OEM customers now to speak of.
    The only way this works for WD is if they remove all management and finance people from STEC.
    Reply
  • milehigh53366 - Thursday, July 04, 2013 - link

    STEC had flash purchase agreements with Samsung, but has switched to Toshiba in the last year or two. That switch and a two year late ASIC set STEC back tremendously. Still, I think if HGST had pushed out a PCI-e flash product I don't think they would have bought STEC.

    Remember that WD and SanDisk agreed earlier this year to work on hybrid HDD/flash drives. That might give WD access to some NAND for other products (or maybe not).
    Reply
  • Shadowmaster625 - Monday, June 24, 2013 - link

    The trend is clear:

    1. ARM devices are steadily eviscerating traditional PC market share.

    2. ARM devices contain an SSD controller which eliminates the market for the type WD products often found in PCs.
    Reply
  • cyrusfox - Monday, June 24, 2013 - link

    This has nothing to do with Arm infiltration and everything to do with rotating platters(Tradition Hard Drives) being noncompetitive against ssd in terms of performance.
    Also embedded NAND in MCP(Multi chip packages) or e-MMC currently still contain an individual controller.
    Your second point should be reversed to state SSD devices contain a controller which may use an ARM chip or something much more custom. WD currently uses some arm chips for HDD controllers as well.
    Reply

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