January 1 marked not only the birth of a new year but also the delivery of a new storage company, Hitachi Global Storage Technologies (HGST), the offspring of Hitachi Ltd.'s US$2 billion acquisition of IBM's disk drive business in December. Although no longer involved in daily operations, IBM maintains a minority interest (30 percent) in the new company, pending completion of the acquisition, which is expected within three years.
The newborn company has sumo wrestler proportions, with manufacturing plants in seven countries, sales operations worldwide, and a workforce of about 21,500 employees. Moreover, HGST inherits from its parents not only their technological genes but also an extensive portfolio that includes disk drives for just about any application, including PCs and servers, mobile computing, automotive functions such as car navigation and audio, and photography devices.
The new company's bet is that technological and operating synergy with the existing Hitachi Data Storage Systems Division (which HGST will officially annex in April), combining revenues from all those segments, and a largest market share will offset the not-so-exciting performance of the previously IBM-owned disk business.
To make its case, HGST needs to spice up its reputation. In fact, although only a few days old, the infant has already begun thumping its chest with a handful of new model announcements that cover a 73GB Ultrastar model that spins at an incredibly fast 15K rpm for high-end applications. HGST is also lauding new Travelstar models for mobile computing and automobile applications, and a push to improve the capacity of the tiny, one-inch Microdrive -- used for digital cameras and pocket computers -- to 4GB.
There's no doubt that the new company's goal is to become the leader (noblesse oblige) in the disk drive market, challenging current market leader Seagate and other respected players such as Fujitsu, Quantum, and Western Digital. This won't happen overnight, but here again the newly formed company can make use of some inherent advantages from its Hitachi and IBM parents -- namely, a well-established customer base and a well-recognized lineage.
Disk drives may very well be a commodity, but the big orders and fat profits come from other storage vendors rather than end-users. Understandably, other Hitachi and IBM divisions, in addition to current HGST customers, will be likely prospects for HGST products, but the name of the game for the foreseeable future is to steal principal accounts from other disk drive vendors.
With that in mind, one of the challenges that HGST faces is to win the trust of customers who are often also competing with its parent company in various storage segments. And achieving that may require more than just top-notch technology.