Wednesday, August 29, 2007

Chinese Tech Company Seek to Take Over Seagate Technology

The chief executive of Seagate Technology, the world’s largest maker of hard disk drives (HDDs), said in an interview that a “Chinese technology company” approached the maker of hard drives with a proposal to acquire the U.S.-based storage solutions maker. The disclosure not only emphasizes intentions of China-based manufacturers to take over high-tech companies, but also causes concerns among
USA government officials.
“Seagate is not for sale… But if a high enough premium was offered to shareholders it would be difficult to stop,” William D. Watkins, the head of of Seagate Technology, is reported to have indicated in an interview with the New York Times news-paper.
Seagate’s current market capitalization is about $13.5 billion, therefore, the undisclosed China-based company would have to spend $16 - $17 billion to acquire the world’s No. 1 maker of hard drives. There are not a lot of China-based technology companies that could be interested in Seagate, though, Legend Group (Lenovo) is the one known for its rather aggressive acquisition strategy.
While hard disk drives do not fall under a list of export-controlled technologies, the attempted purchase of an American disk drive company would require a security review by the federal government, the news-paper cites U.S. government representatives as saying. The U.S. officials warn about possibilities to transfer information from hard drives to third parties, including Chinese intelligent services.
With a booming economy and $1.33 trillion in foreign-exchange reserves, Chinese companies are in a position to acquire various companies, including USA-based technology giants like Seagate Technology. However, the U.S. government is cautious about transferring high-tech companies and their developments overseas. Nevertheless, the acquisition intentions cannot be openly blocked by the country so not to harm relationships with China. On the other hand, the Chinese government would also not like to confront with the USA authorities.
“I do not think anyone in the U.S. wants the Chinese to have access to the controller chips for a disk drive. One never knows what the Chinese could do to instrument the drive,” said an industry executive who participates in classified government advisory groups.

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