Hitachi Cancels its Exit From HDD Market, Starts Consolidating its Business

Japanese conglomerate Hitachi has announced that it dropped its plans of exiting from the hard-disk drive business, and is now gearing up to make a comeback by cutting down on production costs. The news was broken by Hitachi's storage division head during yesterday's conference.

Hitachi's decision is somewhat surprising, given the fact that the company reconsidered its options two days after its arch-rival Seagate missed its outlook expectations and faced a huge drop on the stock market.

Prior to yesterday's announcement, Hitachi claimed that it was considering "all options" regarding the future of its storage business, and engaged in talks with private equity company Silver Lake on bringing additional capital to compensate for the losses.

"We've talked to Hitachi (head office) and made a final decision. We have concluded that we will rebuild the business on our own," Hiroaki Nakanishi, head of the unit, Hitachi Global Storage Technologies, told in a news conference. However, the company is still considering bringing in external capital until it completely consolidates the HDD business.

"In this quickly changing market, you sometimes need to be able to spend a lot on research and equipment, to be able to grab market share," he said.

Moreover, Hitachi executives claimed that they would not resume talks with the credit companies if they can solve the company's financial issues. According to the same sources, private equity firms, however, are more than cash-cows, as their main role is to create a bridge between two distinct business cultures: Hitachi and IBM.

Hitachi's new policy is to return to profit and compensate for the $381 million loss in 2007 by pursuing new opportunities on the notebook PC market, as well as by consolidating its distribution channels for both desktop and mobile storage solutions.

Hitachi Global Storage Technologies has never posted profit since it achieved the storage business from IBM five years ago.