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Fri, Oct 03, 2008 - Page 10 News List

Fujitsu in talks with Western Digital on storage-drive sale

BLOOMBERG

Fujitsu Ltd is in talks to sell its unprofitable storage-drive business to Western Digital Corp, three Fujitsu executives said, asking not to be identified because the discussions are preliminary.

The executives declined to comment on the sale price after the Nikkei Shimbun said yesterday that the business may fetch ¥70 billion (US$659 million) to ¥100 billion.

Tokyo-based Fujitsu said in a statement that the report had “no factual basis.”

SHARES HIGHER

Fujitsu shares rose as much as 7.2 percent in Tokyo trading as Deutsche Bank AG and JPMorgan Chase & Co said a sale may help raise investor confidence over the management’s commitment to boost earnings. The rumored purchase may help Western Digital challenge Seagate Technology’s lead in a storage-drive industry that is not only facing falling prices but also fierce competition from flash memory chip makers.

“It’s necessary for Fujitsu to review its disk drive operations because it’s facing severe competition in an industry that requires large commitments to capital spending for companies to be competitive,” said Yukihiko Shimada, an analyst at Mitsubishi UFJ Securities Co, who rates the company “outperform.”

ASIAN PLANTS

The sale would include plants in Japan, the Philippines and Thailand with 15,000 workers, the Nikkei reported, without saying where it obtained the information.

It would be the largest business unit sale by a Japanese electronics maker and raise Western Digital’s market share to almost the same as market leader Seagate Technology, Nikkei reported.

Western Digital does not comment on rumors, Steve Shattuck, a spokesman for the Lake Forest, California-based company, said in an e-mail.

Fujitsu, Japan’s largest computer services company, gained 5.2 percent to ¥631 at 2:12pm on the Tokyo Stock Exchange yesterday, compared with a 1.1 percent decline in the Nikkei 225 Stock Average.

TURN AROUND

Fujitsu, which does not disclose profitability at the disk drive unit, forecast on July 31 that the business would turn around from a loss and report “several billion yen” in operating income in the year ending March 31 next year.

Sales at the unit are projected to rise 11 percent to ¥370 billion this fiscal year, accounting for about 7 percent of revenue, chief financial officer Kazuhiko Kato said at the time.

Seagate, which bought Maxtor Corp last year, had a 34 percent share of the global hard disk drive market by shipments last year, followed by Western Digital with 22 percent, researcher ISuppli Corp’s figures showed.

Fujitsu was ranked sixth with a 6.9 percent share.

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