HGST to Deepen SSD Capabilities and Expertise with sTec IP and Engineering Talent
SAN JOSE and SANTA ANA, Calif., June 24, 2013 – Western Digital® Corporation (NASDAQ: WDC) and sTec, Inc. (NASDAQ: STEC) announced today that they have entered into a definitive merger agreement under which sTec, Inc., an early innovator in enterprise solid-state drives (SSDs), will be acquired by HGST, a wholly-owned subsidiary of Western Digital. sTec will be acquired for approximately $340 million in cash, which equates to $6.85 per share. This represents approximately $207 million in enterprise value, net of sTec’s cash as of March 31, 2013.
The pending acquisition augments HGST’s existing solid-state storage capabilities, accelerating its ability to expand its participation in the rapidly growing area of enterprise SSDs. HGST remains committed to its highly successful joint development program with Intel® Corp. and will continue to deliver current and future SAS-based SSD products with Intel.
sTec has strong engineering talent and intellectual property that will complement HGST technical expertise and capabilities. HGST will continue to support existing sTec® products and collaborate with its customers to understand their future requirements.
“Solid state storage in the enterprise will play an increasingly strategic role in the future of Western Digital,” said Steve Milligan, president and chief executive officer, Western Digital Corporation. “This acquisition is one more building block in our strategy to capitalize on the dramatic changes within the storage industry by investing in SSDs and other high-growth storage products.”
“This acquisition demonstrates HGST’s ongoing commitment to the rapidly growing enterprise SSD segment, where we already have a successful product line,” said Mike Cordano, president, HGST. “We are excited to welcome such a talented team of professionals to HGST, where their inventive spirit will be embraced and encouraged.”
“At this key point in the evolution of the storage industry, sTec is excited to consummate this transaction. It will be an important next step in proliferating many of the innovative products and technologies that sTec has been known for throughout its 23-year history and provides immediate value for our shareholders and a strong future for our employees and customers,” said Mark Moshayedi, president and chief executive officer, sTec. “This merger will enable our world-class engineering team and IP to continue to make a significant contribution to the high-performance enterprise SSD space that has long been sTec’s focus.”
The board of directors of sTec, on the unanimous recommendation of a special committee of independent directors of the board, has unanimously approved the merger agreement and has resolved to recommend that sTec shareholders approve the transaction at a sTec shareholders meeting to be held to approve the merger agreement and the merger. The directors and executive officers of sTec have entered into separate voting agreements under which they have agreed, subject to certain exceptions, to vote their respective shares in favor of the proposed transaction.
Wells Fargo Securities, LLC has acted as the financial advisor to Western Digital and BofA Merrill Lynch has acted as the financial advisor to sTec in connection with this transaction.
Closing of the acquisition, which is subject to customary conditions, is expected to occur in the third or fourth calendar quarter of 2013.
A provider organization recently reached out to me to discuss the issues they were having trying to get their EHR vendor to do a lab interface with their lab. It was a pretty standard large EHR vendor document where they nickle and dime you for little things like a lab interface. Looking at it always reminds me of when I’ve seen the $5 aspirin charge in the hospital.
The problem with the lab interface charge is that it’s usually $5000 instead of $5. When an organization is choosing to implement an EHR, they often forget about many of the future hidden costs associated with an EHR vendor like the EHR lab interface. Plus, they also forget that the EHR vendor will often charge them $5k for the interface and then the lab will charge them another $5k for that interface. This is often true even when an EHR vendor has created many interfaces with a particular lab vendor before.
In fact, the organization that I mentioned above brought a new light to the cost of lab interface. It turns out that this organization was on its third lab and thus its third lab interface with their EHR. I don’t expect clinics change labs this often, but it is very common for a medical organization to switch from one lab to another. Plus, let’s not even get started on the challenge of getting a hospital lab to integrate with your EHR.
Not all EHR vendors are like those I mention above. In fact, a number of EHR vendors have seen this as a great way to differentiate their EHR from other competing EHR vendors. I know of at least one EHR vendor that’s done a few hundred lab interfaces (all at no cost to the doctor). The large number of labs partially illustrates the challenge associated with lab interfaces. There are just so many of them that need to be done. It’s not like there’s 1 or 2 labs that dominate the market. However, many EHR vendors are offering a free lab interface as part of the EHR purchase. Be sure to ask before you buy.
The sad part of the lab interface story is that because of the items mentioned above, many doctors just end up scrapping a lab interface. They can’t justify a $10k expense to integrate their EHR with the lab. This is unfortunate, because it’s amazing how much benefit can come from a well integrated EHR Lab interface.