When Seagate Technology (Nasdaq: STX) reported its third-quarter results, they weren't much to talk about:

  • Its $0.25 of non-GAAP earnings per share fell $0.02 short of analyst expectations.
  • On the top line, Seagate delivered a slight beat with $2.7 billion of revenue.

And that's about it. Just another mixed quarter, really. Hardly a game changer, and chances are that you'll forget all about it in a month or two.

Well, not exactly
Everything, that is, except for the $1.4 billion deal to buy the hard drive division of Samsung Electronics (OTC BB: SSNLF.PK). The companies may have been coy about the divestiture and sale in their initial press release, but Seagate CEO Steve Luczo used the earnings call to discuss the Samsung deal at great length, using the term "acquisition" for the first time.

The return-fire to Western Digital (NYSE: WDC) buying the hard drive division from Hitachi (NYSE: HIT) is a complex deal, where some parts such as patent cross-licensing and crosswise parts supply contracts will take effect this quarter, while the asset sale has to wait for regulatory approval.

The big deal
Importantly, the Samsung alliance gives Seagate access to a high-volume supply of Samsung's flash memory chips, which should accelerate Seagate's entry into the next-generation world of solid-state and hybrid storage. It's all kinds of OK to wait for Samsung's consumer-oriented (and therefore lower-margin) hard drives for a while as long as the deal includes the key to the magic solid-state kingdom -- which it does.

In short, Seagate becomes a direct rival to SSD specialists SMART Modular Technologies (Nasdaq: SMOD) and STEC (Nasdaq: STEC) on an accelerated timetable, and that's a transformative life-insurance policy for the hard-drive traditionalist.

In fact, given that it is National Poetry Month right now, the heft of the Samsung deal is best conveyed in verse:

Seagate and Samsung (a villanelle)
You will forget one more routine report.
A normal quarter, not a revolution.
The Samsung deal's of permanent import.

When rivals pair, to seek out an escort
Becomes a commonplace solution.
Forget this plain, pedestrian report.

The industry wears thin; a lesser sport
Than Samsung would be downright Lilliputian.
The Samsung deal's of permanent import.

For Seagate, making flash drives runs athwart
To every fiber of its constitution.
You will forget one more routine report.

So licensing from Samsung pressures SMART
And other solid-state champs. What a contribution!
The Samsung deal's of permanent import.

There's more than meets the eye where they cavort,
And Seagate moves along its evolution.
You surely will forget this bland report,
But Samsung is of permanent import.

That, by the way, was my annual megatribute to Poetry Month. The next article in full-fledged verse will appear in April 2012. Thanks.

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