Western Digital Corp. announced Thursday that it had purchaed the assets of magnetic head manufacturer Read-Rite Corp. for approximately $95.4 million in cash.
The purchase gives WDC in-house component manufacturing capabilities, roughly similar to the model used by Seagate and Hitachi. Although sourcing components from third parties gives an OEM improved cost leverage, internal component production capabilities generally ensures a steady supply of parts, analysts have said.
Read-Rites assets include its wafer fabrication facility in Fremont, Calif. and an option to purchase the companys assets in Thailand, which hve a debt obligation of about $62 million. The transaction is expected to close within ten days.
In a statement, Western Digital said that the planned acquisition is aimed at improving its access to recording head technologies over the long term and increasing its operational flexibility. In the near term, the company has secured adequate supply of recording heads for the foreseeable future, including 80 GB technology, from merchant market suppliers.
Western Digital today reported revenues of $680 million on shipments of approximately 10.5 million units, and net income of $48.8 million for its fourth fiscal quarter ended June 27, 2003.