Hard disk drive giants merge
By Charles J. Murray
EE Times
(10/05/00, 2:25 p.m. EST)
PARK RIDGE, Ill. — Maxtor Corp. and Quantum Corp.'s Hard Disk Drive Group are merging to form the world's biggest hard disk drive company.
The newly combined company, which will retain the Maxtor Corp. name, is expected to show its greatest strength in desktop hard drives. Industry analysts say it will capture about 40 percent of the worldwide desktop market, selling approximately 50 million hard drives per year and amassing about $6 billion in annual sales.
Currently, Seagate is regarded as the market's biggest player, accounting for 21.1 percent of all hard drives sold, according to figures from market research company International Data Corp. (Framingham, Mass.). But Quantum (17.2 percent) and Maxtor (13.2 percent) together would account for 30.5 percent of hard drives of all types, including desktop, servers, consumer electronics and network-attached appliances.
Executives of the new Milpitas, Calif.-based company hope that by combining forces, they can also expand beyond the desktop market into higher-growth areas, such as consumer electronics and Intel-based server drives. In particular, they hope to provide millions of hard drives for inclusion in products like digital video recorders, jukeboxes and video games. "The new company is well-positioned for those applications," said Mike Cannon, Maxtor's president and chief executive officer.
To accomplish that goal, Maxtor executives plan to rechannel the company's efforts in areas where duplication exists. By re-investing that funding into growth markets, they hope to support new areas of research and development. "We'll keep the products that are complementary, such as high-end and low-end desktop drives," said Michael Brown, who is currently the chairman and chief executive officer of Quantum. "But in those areas where we now duplicate efforts, we'll move the resources into new markets."
Brown said the midrange desktop market is one area where Maxtor and Quantum now make similar products. The company expects to save between $120 million and $200 million in the first 24 months by consolidating there. It will then plow much of that savings back into new growth areas.
Cannon said that 3.5-inch disk drives will be one new area of concentration for the merged company. "That's a market that Quantum was in previously, but we didn't have the resources to really go after it," Brown said. "Now we'll have the capability to do more advanced work in that area."
Industry analysts say that the merger is a continuation of a 15-year consolidation trend. "In 1985, you could have counted 75 companies worldwide that were making hard disk drives," said Jim Porter, president of Disk/Trend Inc. (Mountain View, Calif.). "Today, if you count very carefully, you can find nine." During those 15 years, major players such as Control Data, Digital Equipment and Hewlett-Packard, among many others, dropped out of the hard disk drive market.
The reason behind the high attrition rate, Porter said, is that most companies were unable to maintain the rapid pace of technology in the disk drive industry. Throughout the late '90s, areal density — the ability to pack more bits of data onto a disk — has doubled each year. "If you're producing a disk drive in January, then you have to figure that you're going to replace it with a new model by the third quarter," Porter said. "The companies that have survived have demonstrated a capability to do that." Remaining companies in the disk drive market include Fujitsu, Hitachi, IBM, Maxtor, Quantum, Samsung, Seagate, Toshiba and Western Digital.
Porter said that industry leaders now produce disk drives that pack 20 Gbytes per "platter." By next year, the state of the art will have doubled to 40 Gbytes per platter, he said. "Maxtor and Quantum have both been successful in keeping that pace," Porter said. "They develop drives on a timely basis and produce them on a timely basis."
One of the keys to the new company's success will be its ability to leverage its desktop technology and create new systems that can be used in consumer electronics. "Variations of their desktop drives should be usable in consumer electronics," Porter said. "The interfaces may be different and they'll need to reduce the noise, but the guts of those units should be the same as the desktop units."
If so, the company could continue to grow because consumer electronics are expected to represent tens of millions of hard drives per year in the future, especially as digital video recorders replace VCRs. "If they can succeed in consumer electronics, then they'll continue to do well," Porter said.
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