sTec will be acquired by HGST, which was bought out by Western Digital just over a year ago. sTec’s agreement to merge with HGST is considered a wise decision since the company already sells the ULTRASTAR enterprise SSD line. Currently there are no SSDs under the Western Digital brand name.
sTec specializes with solid-state drives used mostly in larger data centers and servers and is one of the oldest SSD makers in the industry.
The deal to sell sTec for $340 million to Western Digital follows an insider trading scandal that forced out sTec co-founder Manouch Moshayedi. Moshayedi resigned as the company’s CEO in September 2012 over the allegations of insider trading, and his brother Mark Moshayedi was installed as the new chief officer. Even with the changes, their company value has been falling and is around one half of what its value was this same time a year earlier.
WD offered sTec a price of $6.85 per share, which represented a 91% premium to sTec’s closing stock price at the market close on Friday, June 21st. This sale is directly attributed to sTec’s largest shareholder, Balch Hill Capital, who began pushing the company to sell out after the insider trading scandal began hurting the company’s image.
WD, much like other traditional hard drive makers, is looking to change over to the newer energy efficient solid-state drives that are renowned for their vastly superior performance. Also, solid-state drives are void of any moving mechanical components such as the common spinning disk or moving read/write heads.
Richard Shannon who serves as an investment analyst with Craig-Hallum Capital was quoted as saying, “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.”