GO
Loading...

Enter multiple symbols separated by commas

Western Digital To Acquire Komag For $1 Billion In Cash

Western Digital has agreed to acquire Komag, one of its last rivals in the U.S. hard disk drive industry, for about $1 billion in cash, the companies said Thursday.

The proposed merger comes amid a sharp fall in prices in the highly commoditized computer disk-drive industry, once one of the bedrock manufacturing sectors in Silicon Valley.

Western Digital would pay $32.25 a share for all of the outstanding shares of Komag.

Komag stock rose about 7.5% Friday, while Western Digital was mostly flat.

Separately, Komag warned that revenue for the second quarter will be down at least 30% from the first quarter, well below Wall Street's consensus view or $217.3 million, or an 18% quarterly decline.

Due the sharp revenue decline, Komag expects a substantial operating loss in the quarter.

Analysts have predicted a profit, on average, of 42 cents a share in the current quarter, according to Reuters Estimates.

In April, rival Seagate Technology scaled back its outlook for the current quarter and year, blaming a price war over high-capacity desktop computer drives, which now store as much as about one trillion bytes of data.

The Komag deal comes four years after Western Digital acquired part of another disk drive maker, Read-Rite.

So-called Winchester disk drives -- the basic technology used for storage in personal computers, laptops and a range of consumer electronics -- was invented in Silicon Valley by IBM researchers in the 1970s.

IBM sold most of its own disk drive business to Hitachi in 2003. Seagate acquired Maxtor, another of the remaining independent disk drive makers last year.

Western Digital plans to fund the transaction, including the expected retirement of Komag's convertible debt due in 2014, through cash from the combined company and a senior secured term loan of up to $1.25 billion.

The transaction has been unanimously approved by both boards and is subject to regulatory approvals. It is expected to close in the third quarter of this year.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

U.S. Video

  • Hero miles for military members: Real estate magnate's plea

    Chairman of the Fisher House Foundation, Ken Fisher, discusses the Hero Miles program with CNBC's Dina Gusovsky. During Military Appreciation Month, Fisher is asking every traveler to donate 1,000 of their miles to replenish the Hero Miles programs that is in danger of running out.

  • Cramer shuts down this market's haters

    "Mad Money" host Jim Cramer on why this market can't stop, won't stop.

  • From the battlefield to the boardroom

    Your Grateful Nation is dedicated to helping Special Forces veterans enter the corporate world and Knot Standard provides complimentary suits to vets. Mad Money's Jim Cramer spoke with Rob Clapper, Your Grateful executive director; John Ballay, Knot Standard co-founder and president; Tej Gill, retired U.S. Navy Seal; and Darren McB, active duty U.S. Navy Seal.