Buyout Rumors Continue to Swirl Around Seagate

Arthur Cole

For those interested in solid-state drive (SSD) technology, one topic of discussion around the Thanksgiving table was undoubtedly the fate of Seagate. The company was the subject of whirlwind speculation leading up to the holiday over who would come out on top in the firm's impending sale.

The initial word on Wall Street was that a private equity consortium led by TPG Capital had all but sown up a deal. As the week wore on, however, rumors started to fly that two of the top partners in the deal, Kohlberg Kravis Roberts (KKR) and Bain Capital were getting cold feet.

That news was met with still more rumors that one of Seagate's top rivals-widely believed to be Toshiba but never confirmed-was ready to put in a bid. Following the company's recent acquisition of Fujitsu's hard drive business, adding Seagate would instantly propel Toshiba into the top tier of storage providers, rivaling Western Digital and Hitachi.

All this drama is raising the suspicion meter for some industry watchers, however. Kaushik Roy of Wedbush Securities says it is highly possible that the Toshiba rumors are simply a pressure game on the part of Seagate CEO Steve Luczo to goad TPG and gang to make a quick deal. Roy told eWEEK that integrating Seagate into Toshiba, Samsung, Hitachi or any of the large Japanese storage companies would be a challenge based on their stated strategies and current product line-ups.

Still, the mere fact that there is blood in the water is drawing a number of sharks to Seagate stock. As Schaeffer Research revealed this week, some investors are placing bets on the stock to swing wildly over the next month, with big payouts expected regardless of whether share prices go up or down.

Uncertainty is the enemy of business planning, and continued questions surrounding Seagate's future are bound to depress sales until its fate gets resolved one way or the other. That's a shame because with SSD technology playing an increasingly vital role in high-speed data environments, the loss of a major competitor will hurt across the board.

Let's hope that whoever comes away with the prize has a plan to get the company back into full swing.

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