Samsung sells HDD to Seagate

Samsung Electronics Co is selling its hard-disk-drive (HDD) business to Seagate Technology for $1.4 billion in cash and stock as it seeks to exit from the cut-rate industry and focus on its bread-and-butter memory-chip business.

The deal comes as the HDD industry is set to become even more competitive with Western Digital Corp’s plan to buy Hitachi Ltd’s hard-disk-drive unit for $4.3 billion, a deal that would create a global leader with deep resources.

The sale will help Seagate, the world’s largest maker of hard drives, better compete with the enlarged Western Digital.

The sector is battling persistent sales-growth declines and now faces a longer-term threat from wireless devices such as Apple’s iPad, which use more power-efficient flash drives, or solid-state drives.

“The transactions and agreements significantly expand Seagate’s customer access in China and Southeast Asia,” Samsung and Seagate said in a joint statement.

Seagate expects the deal to be “meaningfully accretive” to its earnings per share and cash flow in the first full year following the closing. It does not plan any material restructuring costs from the deal. Samsung aims to transfer the asset during 2011.

Samsung will receive 45.2 million Seagate shares worth $687.5 million and the rest will be paid in cash.