...polarization of small patches of the surface coating on a (normally) metal disk. The maximum areal density is defined by the size of the magnetic particles in the surface, as well as the size of the "head" used to read and write the data. The areal density of disk storage devices has increased dramatically since IBM introduced the RAMAC, the first hard disk in 1956. RAMAC had an areal density of 2,000 bit/in². Commercial hard drives in 2005 typically offer densities between 100 and 150 Gbit/in², an increase of about 75 million times over the RAMAC. In 2005 Toshiba introduced a new hard drive using perpendicular recording, which features a density of 179 Gbit/in².[1] Toshiba's experimental systems have demonstrated 277 Gbit/in², and in 2006 Seagate Technology demonstrated a drive with a 421 Gbit/in² density.[2] It is expected that perpendicular recording technology can scale to about 1 Tbit/in² at its maximum. [3] Compact Discs (CDs), another common storage media of the early 2000s, stores data in small pits in plastic surface that is then covered with a thin layer of reflective metal. The standard defines pits that are 0.83 micrometers long and 0.5 micrometers wide, arranged in tracks spaced 1.6 micrometers apart, offering a density of about 0.90 Gbit/in². DVD disks are essentially a "product improved" CD, using more of the disk surface, smaller pits (0.64 micrometers), and tighter tracks (0.74 micrometers), offering a density of about 2.2 Gbit/in². Further improvements in HD...
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...The Price of RAM And Hard Drive Storage Over The Past 30 Years The price and capacities of RAM and hard drive storage have come a long way in the past 30 years. Take for instance, in 1981 an 18MB hard drive cost $2500, today a 1TB hard drive costs $150. In 1990 RAM costs were $50 per MB and today one can purchase 2GB RAM for approximately $50. Observe the following table pertaining to hard drive cost vs GB capacity from 1980-2009: Table Source: iStockAnalyst Observe that there is a strong exponential correlation in the capacity vs cost ratio, where r=0.9916. During the last 30 years the capacity per unit cost ratio has nearly doubled approximately every 14 months. The regression equation is given by: Many TB+ drives have become available which recently broken the $0.10/GB boundary, whilst the next milestone being $0.01/GB or $10/TB. If historical trends continue, then 10 years from now the cost per GB of hard drive capacity will become $0.0000351 per GB or $0.0351 per TB. For $100, one could purchase a 2,849TB drive 10 years from now, based on the analysis of historical trends. Although 120 PB drives are currently available in the server and super computing market, consumer grade hard drives aren’t available in these sizes, as the physical size and cost per PB is too great for the marketability in the consumer market. Based on historical trends, one could forecast the availability of a consumer level 100TB hard drive in the next five years. It must be noted all figures...
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...WHEN YOU'RE IN front of your PC, waiting for something to transfer to removable media, seconds can feel like minutes, and minutes like hours. And backups to USB 2.0 appear to crawl along at a snail's pace--so much so that users often become reluctant to perform that essential chore. Such data-transfer scenarios are where the new SuperSpeed USB 3.0 standard and its theoretical, blazing-fast throughput of 5 gigabits per second--as promised by the USB Implementers Forum (USB-IF)--will change your life for the better. And if our tests of four new USB 3.0 hard drives from Buffalo Technology, Iomega, Seagate, and Western Digital are indicative, the change will certainly be dramatic. USB 3.0's impressive speed is its raison d'être, part of its beauty is its backward compatibility with USB 2.0. You need a new cable and a new host adapter (or one of the new motherboards built to but support USB 3.0) to achieve USB 3.0 performance. But you can still use a USB 3.0 device on a USB 2.0 port and achieve typical USB 2.0 performance. You may also use USB 2.0 devices on a USB 3.0 port--though, again, with no gain in speed. The technology behind USB 3.0 more closely resembles PCI Express than USB 2.0. Backward compatibility comes from clever connector design, and a dual bus. The designers added four data lines and a ground wire for the new USB 3.0 signals, and retained the existing pair of data lines for use with USB 2.0 devices. The two technologies share the existing power and ground wires...
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...Seagate Technology Buyout March 22, 2006 By: Rachel Cluck Beth Crocker Heather Preston Jessica Seal Table of Contents Introduction............................................................................3 Objectives ..............................................................................3 Overview................................................................................4 Alternatives – How to Address Seagate’s Low Stock Price ..5 Do Nothing.............................................................................6 Unload all VERITAS Stake ...................................................7 Sell to Other Investors ...........................................................7 Horizontal Merger or Buyout.................................................7 Vertical Integration ................................................................8 Leveraged Buyouts ............................................................. 10 The Discounted Cash Flow Model ..................................... 11 The Leveraged Buyout Model ............................................ 12 The SML Approach ............................................................ 13 LBO Price ........................................................................... 14 Capital Structure Proposed ................................................. 15 Payback Period for Silver Lake .......................................... 17 Shareholders’ Approval ................................................
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...Seagate Technology Buyout I. INTRODUCTION In 1999, Seagate Technology, Inc., decided that in order to increase their market value, they needed to make some big changes. Due to their undervalued stock price, Seagate decided to undergo a leveraged buyout (LBO) with Silver Lake Partners L.P. During this time, four main concerns arose among the parties involved: • • • • How can Seagate address the company’s low stock price? How should the buyout be financed? What should the capital structure look like? How much should investors pay to acquire Seagate’s disk drive operations? How can Seagate address VERITAS Software Corporation’s needs and concerns? After analyzing the case and talking to executives at Silver Lake and Seagate, we think that Seagate’s low stock price is best addressed by a leveraged buyout with a new capital structure composed of 45% equity and 55% debt. Furthermore, we have found that the company is worth approximately $2 billion in the buyout. Finally, VERITAS should agree to participate in the deal because they will also win by retiring a portion of their stock. The subsequent sections of this report will further explain how we arrived at these conclusions. II. ASSUMPTIONS In analyzing the capital structure, the value of the company, and stock price of Seagate Technology, we are operating under the following assumptions: • • • Corporate tax rate of 34% Market risk premium of 9% (based on 75-year historic average) Capital expenditures from Projected Operating...
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...Seagate Technology Buyout This case looked at Silver Lake’s proposed leveraged buyout (LBO) of Seagate Technology Inc’s (Seagate) disk drive operations, followed by the tax-free acquisition of Seagate’s remaining assets by Veritas Software Corp (Veritas). The stock prices of the two firms varied greatly at the time with Veritas’ growing much more rapidly than Seagate’s, 200% versus 20% respectively. Executives believed that Seagate’s shares had become undervalued. In order to take advantage of the situation and make money with minimal or no risk I personally would have invested in Seagate. The idea being that the market would eventually realize this undervaluation and correct the price of Seagate’s shares or the company would look to unlock this shareholder value through other means such as the proposed LBO. If everyone in the market took this position, one would see greater demand for Seagate’s shares and therefore the price of these shares would increase eliminating the undervaluation and the arbitrage opportunity. Seagate and Veritas shares were priced the way they were due to the market’s perceived risk of the two firms. Seagate was observed to have higher risk and that resulted in a more discounted share price. This risk involved the nature of Seagate’s business. In the late 1990’s disk drive producers were becoming more out of favour with the stock market versus software companies. Although disk drive producers were seeing growth in their number of unit sales, high...
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...segments o Slowing revenues, increased unit sales • Storage networking, Consumer Electronic market- new growth segments Seagate Technology • Founded in 1979 • Designs, manufactures, and market a broad line of disk drives for use in computer systems for desktop PCs, workstations and servers, and supercomputers • Only major independent disk drive manufacturer to be fully vertically integrated o Higher R&D and capital expenses, therefore higher fixed costs o Gives a comparative advantage , can develop technologies “in- house” so wouldn’t have to depend on independent suppliers, in turn eliminates risk of being unable to offer cutting edge technology in its products in case of economic downturn o Could better adapt to demand fluctuations, very helpful since short product life cycles • Financially volatile like the rest of the disk drive industry • Maintains products in both high-end and low-end markets • In 1996 and early 1997, launched a broad-restructuring effort , exited mobile disk drive segment, began to target storage networking and consumer electronics market o Acquired XIOtech Corp. o Supplying WebTV with disk drives Background of Buyout Transaction: • In May 1999 sold Network & Storage Management Group (NSMG) to VERITAS Software o Seagate received 155M shares of VERITAS stock, making it over a 40% stockholder • Problems: o Over next six months, VERITAS shares...
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...Seagate Technology Buyout - Case Study Question 1: Why is Seagate undertaking this transaction? Is it necessary to divest the Veritas shares in a separate transaction? Who are the winners and losers resulting from the transaction? Answer: Seagate Technology was badly undervalued as far asSTOCK MARKET is considered, and due to this, the company decided to go for leverage buyout option. A large stake of VERITAS Software Corporation's stocks is owned by Seagate Technology, because of which its stock price is doubled (from its original price), however, the share price of Seagate Technology hardly changed for a long time. Therefore, the reason that the attempts and efforts of senior management were useless, made them decide to engage in Leverage Buyout (LBO). As a result, Seagate went for two fold transaction, i.e. the first is to sell out all of the company's disk drive manufacturing assets including $ 765 million of cash to the acquirer “Silver Lake”. On the other hand, the most crucial thing for Seagate Technology is to take care of the large stake of VERITAS Software Corporation's stocks. Therefore, it was essential for Seagate Technology to go for a separate transaction in order to evade paying large amount of taxes. The transaction of shares among VERITAS and Seagate is taken into account as reorganization of asset, while not applying any corporate taxes. Thus, by using two-fold transaction, Seagate Technology became able to liquidate its undervalued shares...
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...Seagate Technology Buyout CASE SUMMARY In May of 1999, Seagate sold one of its companies, the Network & Storage Management Group (NSMG), to VERITAS in return for 155 million shares of VERITAS stock. The transaction made Seagate VERITAS’s largest stockholder, creating an ownership stake of over 40%. When a few problems regarding stock prices arose, concerned shareholders were not far behind. Following the transaction, the market was failing to recognize the value of Seagate’s stake in VERITAS, as evident from a 200% increase in VERITAS stock versus only a 25% increase in Seagate’s stock. The board felt that the market was incredibly under pricing Seagate’s stock. After two failed attempts to increase Seagate’s stock price and unlock its value from VERITAS, the company turned to Morgan Stanley for help. In early November of 1999, Morgan Stanley arranged a meeting between Seagate executives and representatives of Silver Lake Partners. After several months of discussion, Silver Lake delivered a proposal and potential solution to Seagate’s problem. This proposal involved a complicated two-step transaction. The first step would involve Seagate selling off its disk drive business, including about $765 million in cash, to a newly-formed company controlled by Silver Lake. The purchase would be financed through a LBO in which Silver Lake and other private equity investors would provide a portion of the selling price through equity, and the rest would be financed through debt The second...
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...Learning with Cases INTRODUCTION The case study method of teaching used in management education is quite different from most of the methods of teaching used at the school and undergraduate course levels. Unlike traditional lecture-based teaching where student participation in the classroom is minimal, the case method is an active learning method, which requires participation and involvement from the student in the classroom. For students who have been exposed only to the traditional teaching methods, this calls for a major change in their approach to learning. This introduction is intended to provide students with some basic information about the case method, and guidelines about what they must do to gain the maximum benefit from the method. We begin by taking a brief look at what case studies are, and how they are used in the classroom. Then we discuss what the student needs to do to prepare for a class, and what she can expect during the case discussion. We also explain how student performance is evaluated in a case study based course. Finally, we describe the benefits a student of management can expect to gain through the use of the case method. WHAT IS A CASE STUDY? There is no universally accepted definition for a case study, and the case method means different things to different people. Consequently, all case studies are not structured similarly, and variations abound in terms of style, structure and approach. Case material ranges from small caselets (a few paragraphs...
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...Mergers, Acquisitions and Corporate Restructuring II MERGERS, ACQUISITIONS AND CORPORATE RESTRUCTURING Mergers, Acquisitions and Corporate Restructuring Edited by Chandrashekar Krishnamurti Vishwanath S.R. Copyright © Chandrashekar Krishnamurti and Vishwanath S.R., 2008 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2008 by Response Books Business Books from SAGE B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for Response Books, typeset in 9.5/13 pt Berthold Baskerville by Star Compugraphics Private Limited, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Mergers, acquisitions and corporate restructuring/edited by Chandrashekar Krishnamurti, Vishwanath S.R. p. cm. Includes references and index. 1. Consolidation and merger of corporations. Corporate reorganizations. I. Vishwanath, S.R., 1971– II. Krishnamurti, Chandrashekar, 1956– HG4028.M4 .M44 658.1/6 22 2008...
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...Transactions and Strategies Economics for Management This page intentionally left blank Transactions and Strategies Economics for Management ROBERT J. MICHAELS Mihaylo College of Business and Economics California State University, Fullerton Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Transactions and Strategies: Economics for Management Robert J. Michaels Vice President of Editorial, Business: Jack W. Calhoun Publisher: Joe Sabatino Sr. Acquisitions Editor: Steve Scoble Supervising Developmental Editor: Jennifer Thomas Editorial Assistant: Lena Mortis Sr. Marketing Manager: John Carey Marketing Coordinator: Suellen Ruttkay Marketing Specialist: Betty Jung Content Project Manager: Cliff Kallemeyn Media Editor: Deepak Kumar Sr. Art Director: Michelle Kunkler Frontlist Buyer, Manufacturing: Sandee Milewski Internal Designer: Juli Cook/ Plan-It-Publishing, Inc. Cover Designer: Rose Alcorn Cover Image: © Justin Guariglia/Corbis © 2011 South-Western, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means— graphic, electronic, or mechanical, including photocopying, recording, taping, Web distribution, information storage and retrieval systems, or in any other manner—except as may be permitted by the license terms herein. For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support...
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