Wednesday February 17, 4:10 pm Eastern Time
Company Press Release
SOURCE: Western Digital Corporation; Komag, Incorporated
Western Digital, Komag Announce Strategic
Transaction for Disk Media Manufacturing
Komag to Acquire WD Media Business; Volume Purchase Agreement to Expand Relationship
IRVINE and SAN JOSE, Calif., Feb. 17 /PRNewswire/ -- Western Digital Corporation (NYSE: WDC - news) and
Komag, Incorporated (Nasdaq: KMAG - news) today announced they have signed a letter of intent under which Komag
will acquire Western Digital's disk media business for approximately $80 million in Komag common stock. In addition,
Komag will assume certain liabilities, mainly leases related to production equipment and facilities.
The disk media business has been operated by Western Digital since 1988. It produces the magnetically coated disks on
which data is stored in hard drives. In calendar 1998, its media business provided approximately 61 percent of Western
Digital's desktop disk requirements.
Terms of the planned strategic relationship include a three-year volume purchase agreement under which Western Digital
would buy a substantial portion of its media from Komag, already a long-time WD supplier. In the December quarter, nearly
90% of Western Digital's total media requirements were supplied by a combination of its own media operation and Komag.
Komag will issue unregistered shares of its common stock to Western Digital for the assets purchased. Those shares can be
resold in specified increments over a 3 1/2 year period.
Completion of a definitive agreement is expected by the end of March, 1999, subject to the approval of both companies'
boards of directors. Regulatory approval and other third party consents are required for the closing of the transaction.
Western Digital and Komag view the expansion of their business alliance as an opportunity to focus on respective core
competencies. Komag expects to leverage the human and technical resources of the combined operations to extend its
industry leadership in media technology and high volume production. The two companies will work closely on the design and
development of media for future hard drive products. These efforts should further enhance the time-to-market of WD's drive
designs and lower its component costs through the efficiencies of Komag's global high-volume media manufacturing facilities.
Western Digital chairman, president and chief executive officer Chuck Haggerty said the proposed transaction is in line with
the company's virtual vertical manufacturing strategy, under which WD performs design, assembly and marketing activities
while securing components and sub-assemblies from long- time, high quality suppliers.
He said, ''In today's disk media business, the pace of technological change and capital demands has accelerated. Eliminating
the redundancy of an internal media operation and partnering with Komag is a key to fine-tuning the WD business model in
this new environment. Komag is a proven business partner with deep technological resources and they are committed to
making the required future investments. With their highly specialized knowledge and skills, Komag and our other merchant
media suppliers are best able to produce these parts and materials using the highest standards of quality. This move will
enable Western Digital to reduce capital spending and, if required, redirect investments to other business activities.''
Stephen C. Johnson, president and chief executive officer of Komag, stated: ''Looking forward, market forces are dictating
structural change in the disk media industry. Media suppliers must advance technology rapidly to support the industry's
shorter product cycles and must lower production costs relentlessly to maintain profitability in light of aggressive industry
pricing. As a result, the successful media company of the future will need high unit volumes to spread the fixed costs
associated with media manufacturing and a large revenue base to support a significant research and development effort.
''For these very reasons, Komag is purchasing Western Digital's media business. Over an 18 month period we plan to
combine WD's media group into Komag's manufacturing operations. Such action will move a greater proportion of our
production offshore and more fully utilize the company's low cost Malaysian operations. The transaction will have a dilutive
effect on Komag's 1999 financial results but the consolidation should lower our costs, improve profitability and increase cash
flow in 2000 and beyond,'' said Johnson.
Founded in 1983, Komag, Incorporated has produced over 370 million thin-film disks, the primary storage medium for
digital data used in computer disk drives. The company is well-positioned as the broad-based strategic supplier of choice for
the industry's leading disk drive manufacturers. Through its highly automated factories in the United States, Japan and
Southeast Asia, Komag provides high quality, leading-edge disk products at a low overall cost of ownership. These
attributes enable Komag to partner with customers in the execution of their time-to-market design and time-to-volume
manufacturing strategies. For more information about Komag, visit Komag's Internet home page at komag.com
or call Komag's Investor Relations 24-hour Hot Line at 888-66-KOMAG or 408-576-2901.
Western Digital Corporation is a leader in information storage products and services. The company designs and
manufactures hard drives for personal and enterprise-wide computing, and markets them to leading systems manufacturers
and selected resellers under the Western Digital brand name. Western Digital is the first Fortune 500, multinational company
to have been awarded company-wide ISO 9001 registration, linking all WD organizations with a consistent global standard
for quality processes. The company was founded in 1970 and has long been noted for its storage and end-market
systems-level design knowledge. The company's World Wide Web home page can be found at
westerndigital.com.
This release contains forward-looking statements, including statements relating to: completion of the transaction outlined in
this release; future purchases of Komag media by Western Digital; the issuance of Komag shares pursuant to the transaction
and the subsequent resale of such shares by Western Digital; future design and development collaboration between Western
Digital and Komag; fine-tuning of the Western Digital business model; Komag's commitment to future investments and its
ability to produce products with the highest standards of quality; reduction and possible redirection of Western Digital's
capital spending; structural changes in the disk media industry; the requirements for a successful media company in the future;
Komag's plan to combine Western Digital's media group with its manufacturing operations; and the effect of the transaction
on Komag's financial results in 1999 and future years.
The forward looking statements are based on current expectations of Western Digital and Komag, respectively, and actual
results may differ materially from these expectations as a result of several factors, including: final terms of the agreements to
be negotiated; when and if the transaction is approved by the companies' boards of directors; when and if necessary
regulatory approvals and other third party consents to the transaction are obtained; closing of the transaction; future
technology developments and other competitive factors in the hard drive industry; business conditions and growth in the
computing industry; effectiveness of future product development by Komag and Western Digital; qualification of Komag's
future products by Western Digital and other disk drive makers; volume of sales and market share attained by Western
Digital; Komag's ability to realize the benefits of scale through the successful combination of the two media operations;
continued improvement in Komag's manufacturing efficiencies, in particular product yields and material input costs; and other
factors discussed in the each of the company's last filed Form 10-K and recent Form 10-Qs and other SEC filings. Neither
Western Digital nor Komag undertakes any obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of such statements.
SOURCE: Western Digital Corporation; Komag, Incorporated
More Quotes
and News:
Komag Inc (Nasdaq:KMAG - news)
Western Digital Corp (NYSE:WDC - news)
Related News Categories: computer hardware, computer peripheral, computers
Help
Copyright © 1999 PRNewswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without
the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
See our Important Disclaimers and Legal Information.
Questions or Comments?
Selling the divison is good, but getting Komag shares instead of money is not too smart.
CHUCK MUST GO!!!!!!!!!!!!!!!! |
