Seagate Buys Xyratex To Improve Hard Drive Testing

Seagate has agreed to buy  its long-term partner, British enterprise storage specialist Xyratex, for around $374 million (£228m).

The acquisition should help one of the world’s largest storage vendors improve its supply and manufacturing chain, and give it access to the state-of-the-art hard drive testing equipment developed by Xyratex. Seagate will operate this business as a standalone entity, aiming to expand it further.

“Seagate shares our commitment to innovation and the critical role that test plays in providing the best storage products at the lowest possible cost,” said Ernie Sampias, CEO of Xyratex.

The deal is expected to close in the middle of next year. The news sent Xyratex’ share price up 27 percent on Tuesday morning.

Test pilots

Xyratex, headquartered in Havant, UK, has been working with hard drives for more than 25 years. It manufactures and sells a wide range of modular storage systems – from cheap enclosures to intelligent appliances with applications in analytics and High Performance Computing. But more importantly, the company has developed one of the industry’s largest hard drive capital test equipment businesses.

“As the average capacity per drive increases to multi-terabytes, the time to test these drives increases dramatically,” explained Dave Mosley, president of Operations and Technology at Seagate. “Therefore, access to world-class test equipment becomes an increasingly strategic capability.

“As a premier provider of HDD testing equipment, Xyratex is an important partner and we are excited to integrate these important capabilities which will considerably streamline our supply and manufacturing chain for our core HDD business.”

According to an analyst quoted by Reuters, the acquisition should help Seagate strengthen its supply chain and cut down on costs, as the company begins to own more of the equipment it uses.

Seagate expects the transaction to be neutral to earnings per share in its fiscal 2015, when the new business could be bringing as much as $600 million in revenue.

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