Seagate to Pay $1 Billion for OCZ

No need to compete when you can simply buy your competitors and stop the R&D

By Constantin Murariu on July 20th, 2012 08:01 GMT

It seems that bad news is following the IT business this year. The sales are down due to the overall economy, system prices are up because of the HDD duopoly between Seagate and WD and now it seems that Seagate will tie down the fast pace of SSD development.

Going from a net income of about 0.3 ~ 0.4 billion dollars in the past years to over 4 billion dollars this year is giving Seagate all the money it needs to simply buy up the computer storage market.

Sure, Seagate can’t buy all the players, but the reality is that it only needs to snatch up the stars of the competing teams and if they ever feel there’s not enough profit left after these acquisitions, Western Digital will buy the rest and the two Dons of the HDD market will enjoy tranquility and huge profits.

Giving OCZ’s good work, impressive results, amazing R&D and the willingness to reinvest almost all the profits, it’s no wonder the company is doubling in size every year.

SSD business is moving very fast and the performance advances are so high that most industry insiders agree that HDDs will become a dreaded commodity and SSDs will, in fact play the role of the fast storage media that will make your computer “fly.”

HDDs, although indisputably needed, are losing the spotlight in the computer storage business and just like optical disc drives, when you’ve lost the image impact in the eyes of the consumer, the prices are only going down.

Seagate and Western Digital bought up most of the competition and now rule more than 90% of the HDD market.

They used the fake HDD “crisis” to triple the prices and now they have enough money to buy back the company’s shares and enjoy the profits that come with playing in a duopoly.

Both companies have already bought back over three billion dollar worth of shares each and now they seem to be doing some more shopping in the computer storage industry.

Now, rumors say that Seagate is eyeing OCZ’s SSD business and that the deal might appeal to OCZ too.

By buying OCZ, Seagate would be buying the star of the SSD market and it would be free to stop or slow the R&D process and charge customers a 30% to 50% price premium for every 9% performance increase.

There will likely be no more impressive yearly 30% performance improvements and certainly no yearly 30 % ~ 50 % price reductions.

OCZ’s current market evaluation is somewhere around 350 million dollars, but seeing the opportunity it gets, Seagate will likely offer close to 1 billion for Ryan Petersen’s great team.

Sure, OCZ is truly worth the money. The brand, the product line, the roadmap, the market clout, the server products are all elements that are missing from Seagate’s SSD efforts that are practically inexistent.

Ryan Petersen has done an amazing job, and if there’s one young company in the computer storage industry that it worth a billion dollars, that company is surely OCZ.

All that is left for us to hope is that Mr. Petersen will build another SSD company with the money it gets from Seagate, as the buyout is certainly not beneficial for our budget health.
Seagate logo and money stack mashup
   Seagate logo and money stack mashup
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