Chinese company gains control of Iomega

International Herald Tribune

HONG KONG — Great Wall Technology, a Chinese computer maker, will gain control of Iomega, the U.S. distributor of computer data storage equipment, in a complex deal worth as much as $323.1 million.

Great Wall will sell ExcelStor, a subsidiary, to Iomega in exchange for a 60 percent stake in Iomega - 37 percent for Great Wall and 23 percent for ExcelStor - and $50,000 in cash, according to a Hong Kong stock exchange filing Wednesday.

Great Wall, based in Shenzhen, would also control five of the nine seats on Iomega's board, the company said.

Industry executives said the deal was not directly related to concerns expressed by U.S. government officials this year about the possibility that a Chinese company might be preparing to acquire a U.S. maker of disk drive technology.

Seagate Technology and Western Digital, both U.S. companies, make the most advanced drives.

IBM, which invented the disk drive in the 1950s and dominated through the 1990s, sold its disk drive business to Hitachi in 2002. Two other Japanese companies, Fujitsu and Toshiba, and a division of Samsung, a South Korean electronics conglomerate, are also major disk drive makers.

The deal gives Great Wall access to Iomega distribution channels, Great Wall said.

The Iomega chief executive, Jonathan Huberman, said the deal was intended both to give the company leverage in China, where it is not active, and to use the Iomega brands to sell Chinese-made products beyond disk drives.

"We're not a technology house, we're a brand and a channel," he said. The company sells 70 percent of its products in Europe and 20 percent in the United States, he said.

An industry analyst said that ExcelStor, which distributes for Great Wall outside China, has so far not developed its own line of drives and remains largely a contract manufacturer for Hitachi.

"ExcelStor has largely failed as a disk drive manufacturer," said James Porter, president of Disk/Trend, an industry consulting firm. "They have been unable to keep up with the fast U.S. manufacturing cycles."