Maxtor, Quantum Combine Forces

Two of theindustry’s leading hard drive makers recently announced that they are teamingup to create a new company that will produce more than 50 million hard drivesper year.

Maxtor andQuantum desktop hard drive business will become Maxtor Corp. The all-stocktransaction is valued at about $2.3 billion. Michael A. Brown, chairman and CEOof Quantum, says the new Maxtor is “going to be the premier drive company inthe industry.”

Maxtor’scurrent president and CEO, Mike Cannon, will head the new corporation. Brownwill join the new company's board of directors. Cannon estimates that it willtake about 18 months to complete the integration, and says he foresees a 10percent reduction in workforce because of the reshuffling.

Theremaining parts of Quantum’s storage business, including the market-leading DLTtape line, will remain a separate company retaining the name Quantum.

Brown willremain the head of the revamped Quantum.

The boardsof both companies unanimously agreed to the merger. Quantum's Hard Disk Drive(HDD) Group stockholders will receive 1.52 shares of Maxtor common stock forevery share of HDD common stock they own.

Cannonsays, "The combined company will have the financial resources, productbreadth, and intellectual property to capitalize on the future explosive growthof storage at both the storage device and subsystem levels.” He estimated thatgrowth of about 15 percent per year. The company expects total sales to reach$6 billion annually.

Brown sayshe will not speculate about what effect the merger could have on current harddrive prices, which have been in a sharp nosedive for years. Analysts say thatthe desktop PC market has matured, forcing price wars between competingcompanies.

LikeQuantum, Veritas and Seagate recently split apart their enterprise and desktophard drive businesses. Seagate, which owned Veritas, spun the storagemanagement vendor and took the desktop hard drive business private.

HyundaiElectronics America, which owns a 35 percent stake in Maxtor, indicated inwriting that it supports the merger.

Quantum Corp., Milpitas,Calif.,
Maxtor Corp., San Jose, Calif., www.max