Toshiba and Fujitsu Limited today announced that they have signed a memorandum of understanding (MOU) on the transfer of Fujitsu's hard disk drive (HDD) business to Toshiba.

The companies plan to conclude a transfer contract at an early date, and aim to complete the transaction in the first quarter of fiscal 2009.

Fujitsu said that it would facilitate the transfer by bringing its HDD-related businesses and functions together in a new company. Toshiba will acquire about an 80 percent stake in this company and make it a Toshiba Group subsidiary. In order to promote a smooth transfer, Fujitsu will continue to hold a stake of under 20 percent in the new company for a certain period of time, after which it will become a wholly owned subsidiary of Toshiba.

Under the MOU, Fujitsu will transfer to Toshiba its HDD design, development, manufacturing, sales, and all other functions currently carried out by Fujitsu and Fujitsu Group companies, with the exception of Fujitsu's HDD head and media businesses.

The consolidation of the two companies' HDD businesses will enable Toshiba to reinforce its already strong position as a leading vendor of small form factor HDDs (2.5-inch and smaller HDDs), widely used in notebook PCs, mobile devices, automotive and consumer electronics. It will also give Toshiba entry into the enterprise HDD market for server and data storage system applications.

Entry into the enterprise business will allow Toshiba to further enlarge its solid state drive (SSD) business by developing SSD products for servers and enterprise storage systems, fusing Toshiba's NAND flash memory technology with Fujitsu's enterprise HDD technology.

Going forward, Toshiba aims to build on the consolidation to raise its share in the overall HDD market to over 20 percent by 2015.

The Fujitsu/Toshiba combination would almost double Toshiba?s market share in hard-disk drives to about 16 percent, rivaling Hitachi Ltd.?s rank as the industry?s third-largest producer.

Seagate Technology, the world?s largest producer of hard- disk drives, bought magnetic-head manufacturer Maxtor Corp. in 2007, while its closest rival Western Digital paid $1 billion for component maker Komag Inc. last year.