Reuters: Technology News: Western Digital buys Stec to build solid-state business

Reuters: Technology News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Western Digital buys Stec to build solid-state business Jun 24th 2013, 14:48 A Western Digital Corporation hard drive is pictured here in Encinitas, California April 19, 2011. Credit: Reuters/Mike Blake By Chandni Doulatramani Mon Jun 24, 2013 10:48am EDT (Reuters) - Hard drive maker Western Digital Corp will buy troubled Stec Inc to become one of the top players in the high-growth solid-state drive (SSD) industry that has flourished despite high prices of the storage devices. Stec is one of the oldest makers of solid state drives, which are much faster than traditional hard drives, but it has lost market share to the likes of Western Digital, Seagate Technology PLC and market leader Fusion-io Inc. The deal to sell Stec for $340 million follows an insider trading scandal that forced out its co-founder and CEO last year. Stec shares have halved in value this year. Western Digital and other companies that make personal hard drives and traditional PC hard drives are looking to switch to the newer drives that are more reliable and energy efficient. Western Digital offer of $6.85 per share represents a 91 percent premium to Stec's closing share price on Friday. Stec shares jumped 87 percent to $6.74 in morning trading on the Nasdaq. Western Digital shares were down 1.5 percent. "I think Stec was looking at a long series of losses, and their current management team may have been impeding their ability to get business with certain original-equipment manufacturer customers," said Craig-Hallum Capital analyst Richard Shannon. The deal comes about six months after the Stec's biggest shareholder, Balch Hill Capital, started pushing the money-losing company to consider a sale after the scandal. Stec has looked at other suitors including Seagate and is unlikely to get higher offers, Benchmark analyst Gary Mobley said in a research note to clients. Mobley downgraded the stock to "sell" from "hold". Seagate told Reuters last year that it was looking to buy smaller rivals that have a significant share of the enterprise market. Stec specializes in hard drives used in servers and data centers. Stec's co-founder, Manouch Moshayedi, resigned as chief executive in September over insider trading charges. His brother, Mark Moshayedi, took over as the interim CEO. Stec's revenue has been declining since 2011 and halved in the first quarter this year from a year earlier. The company's stock trades at 1.3 times forward 12-month sales, mostly in line with the sector average, according to Thomson Reuters data. The sale is expected to close in the third or fourth quarter of 2013. Wells Fargo Securities LLC is the financial adviser to Western Digital while BofA Merrill Lynch advises Stec. (Writing by Sayantani Ghosh in Bangalore; Editing by Don Sebastian) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions