14 DAY TRIAL // Hitachi, the Japanese giant has started talks with Toshiba and Fujitsu about forming a new company to produce hard disk drives and storage systems. This is quite a surprise, since Hitachi is about to sell its own hard-drive business, and the eternal rivalry between the three companies are highly unlikely to bring something good.
The new joint-venture will be comprised of the Toshiba and Hitachi hard-drive divisions as well as Fujitsu's storage systems business. Toshiba and Hitachi had some serious profit issues with their HDD businesses and hope to resurrect these dying branches. Each conglomerate will own a third of the new company.
The partnership is an alternative to a private equity buyout, after Hitachi engaged in discussions with equity firm Silver Lake and others about bringing its business back on track. However, the discussions did not bear fruit, according to some internal sources.
Silver Lake is working closely with another storage monster, embodied by Seagate. The investment company took Seagate private a while ago and brought it to profit again. Moreover, Silver Lake founder Jim Davidson resigned from Seagate's board in December.
The discussions between Hitachi and Silver Lake are likely to reach a dead end because of the communicational obstacles that are likely to arise. Hitachi is more of a traditional Japanese company and it is likely to trust other Japanese business partnership rather than a non-Asian corporation. Sources say that, even if there will be Japanese translators during the talks, Hitachi and Silver Lake probably won't "speak the same language".
No matter the result, "something has got to happen", says one former hard drive executive. Hitachi entered the storage market in 2002, soon after the Japanese company acquired IBM's HDD division. Since then, the conglomerate started to lose market in favor of Seagate and Western Digital.