End of an Era for IBM

Last week marked the end of an era with the completion of an agreement between IBM and Hitachi to combine IBM's hard disk operations with Hitachi's. IBM began producing hard disks in the early 1970s. The agreement results in the formation of a new company: Hitachi Global Storage Technologies.

After gaining the necessary government regulatory approvals, Hitachi purchased the majority of IBM's hard disk drive (HDD)-related assets. According to terms of the agreement, Hitachi paid IBM 70 percent of the $2.05 billion purchase price. Hitachi will pay the remainder to IBM over the next 3 years.

In June, IBM decided to sell its HDD-related assets after struggling with its disk drive business for the past few years. According to IBM, the business lost more than $500 million in the past 2 years due to the highly competitive, low-margin nature of the disk drive marketplace. Hitachi hopes to turn the business around and become the world's number-one disk drive manufacturer. The company aims to begin making the new venture profitable by April 2003.

Hitachi Global Storage Technologies will be based in California with 11 offices around the world and 24,000 employees. Hitachi hopes to increase its sales from $5 billion in the next fiscal year to $7 billion by 2006.