Buying Time

Western Digital Corp. announced that it would buy Hitachi Global Storage Technologies (GST) for $4.25 billion, while LSI Corp. said that it has signed a definitive agreement to sell its external storage systems business to NetApp Inc. In other news, Teradata Corp. said that it would purchase Aster Data Systems Inc. for $263 million. Finally, Lawson Software Inc. confirmed that it is in talks with two firms about selling the company.

Focal Points:

• Western Digital announced that is acquiring Hitachi GST for $4.25 billion in a friendly takeover. The money comes as $3.5 billion in cash and 25 million Western Digital shares worth $750 million at $30.01 per share, said Western Digital. The acquisition will be funded from Western Digital's cash and approximately $2.5 billion of debt, Western Digital added. Hitachi Ltd., which is the sole owner of Hitachi GST, will claim roughly 10 percent of Western Digital shares after the transaction is complete. The combined company will still be called Western Digital, and will make up about half of the worldwide hard drive market. Following the completion of the deal during the third quarter of the year, Hitachi will have two directors on Western Digital's board. Western Digital CEO John Coyne will remain as CEO, although Hitachi GST CEO and President Stephen Milligan will become a president at Western Digital reporting into Coyne, the companies added.
• Meanwhile, LSI has agreed to sell its external storage systems business, which develops Engenio products and technology, to NetApp for $480 million in cash. With this sale, LSI will transform itself into a pure-play semiconductor company. LSI said that NetApp will purchase substantially all of the assets of the external storage systems business. This business generated revenues of $705 million in 2010, or about 27 percent of LSI's $2.57 billion in revenue, according to financial reports. Additionally, this business has been LSI's only real growth segment over the past eight years. LSI expects that most of its external storage systems employees will join NetApp. Moreover, upon closing of the transaction, LSI expects to trim $35 million to $40 million per quarter of operating expenses. LSI and NetApp anticipate the deal to close in approximately 60 days.
• According to Teradata, the vendor will pay $263 million to acquire Aster Data, an analytics software provider that handles large sets of both structured and unstructured data. Teradata claims that Aster Data's technology will now enable Teradata customers to manage a variety of diverse, unstructured data, including genomics, photographs, sensor networks, social networks, video, and Web applications. This is the second such acquisition for the company this year. In January, Teradata also acquired Aprimo for $50 million. Finally, Lawson Software has confirmed that it is talking with two firms about an unsolicited offer to pay $11.25 per share ($1.8 billion in total) for all of Lawson's shares. According to the ERP software company, the two offers on the table are from business applications software provider Infor Global Solutions and private-equity firm Golden Gate Capital. Lawson says that the talks are continuing, but that its board has not decided yet on whether it wants to sell the firm. Additionally, Lawson said that there is no guarantee that a deal will be made with either of the two firms.

Experton Group believes mergers and acquisitions will continue to shake up and reshape the IT industry over the course of the next few years. With the Hitachi GST acquisition, Western Digital gets access to the Hitachi GST/Intel Corp. solid state drive (SSD) project, which should give the drive maker an entry into the enterprise SSD market. This should help it expand into new areas. NetApp's acquisition of LSI will help grow its OEM market as well as its own brand sales. It is a logical addition for the company but does not make up for the loss of Data Domain to EMC Corp. last year. Teradata continues to surprise and demonstrate that it can perform well now that it is out from under the NCR Corp. umbrella. The Aster Data purchase will enable Teradata to compete more holistically against its primary (and larger) competitors. It has been a long struggle for growth and profits at Lawson and its acquisitions of Intentia and others, and its restructuring, did not prove to be the cure. The move by Infor CEO Charles Philips, the ex-President of Oracle Corp., is not surprising, as Infor has been on the acquisition trail. Mr. Philips is planning to pursue an acquisition strategy similar to Oracle's except in the mid-market space. Lawson is a good fit for Infor and can be nicely leveraged with its other software businesses. IT executives should not see much change when some of these deals close. However, IT executives can expect Teradata to become more aggressive once the Aster Data deal completes and should see Infor pushing multiple cross-selling opportunities to Lawson accounts if it wins the bidding war and the acquisition finalizes.