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Maxtor, Quantum Combine Forces

Two of the industry’s leading hard drive makers announced Wednesday that they are teaming up to create a new company that will produce more than 50 million hard drives per year.

Maxtor Corp. and Quantum Corp's hard drive business will now become just Maxtor Corp. in the all-stock transaction, valued at about $2.3 billion. Michael A. Brown, chairman and chief executive officer of Quantum, said during a conference call that the new Maxtor is “going to be the premier drive company in the industry.”

Maxtor’s current president and CEO, Mike Cannon, will head up the new corporation, and Brown will join the company's board of directors. Cannon estimated that it would take about 18 months to complete the integration, and said that he foresees a 10 percent reduction in workforce because of the reshuffling.

The boards of directors of both companies unanimously agreed to the merger, in which Quantum's Hard Disk Drive Group (HDD) stockholders will receive 1.52 shares of Maxtor common stock for every share of HDD common stock they own.

The remaining parts of Quantum’s storage business, including their market, leading DLT tape line will remain a separate company, called “Quantum.” Although Quantum’s SuperDLT tape line has exploited synergies from the hard drive business, desktop hard drives and enterprise-scale tape systems can be significantly different markets. Brown will remain the head of the revamped Quantum.

Cannon called the union “a bold and strategic step for both companies. The combined company will have the financial resources, product breadth, and intellectual property to capitalize on the future explosive growth of storage at both the storage device and subsystem levels.” He estimated that growth at about 15 percent per year. The company expects total sales to reach $6 billion annually.

Brown said he would not speculate about what affect the merger could have on current hard drive prices, which have been in a sharp nosedive for years. Analysts say that the desktop PC market has matured, forcing price wars between competing companies.

Like Quantum, Veritas and Seagate recently split apart their enterprise and desktop hard drive businesses. Seagate, which owned Veritas, spun off the storage management vendor, and took the desktop hard drive business private.

Hyundai Electronics America, which owns a 35 percent stake in Maxtor, has indicated in writing that it supports the merger. – Keith Ward

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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