Fujitsu May Sell Hard Drive Storage Unit to Western Digital

The company denies reports that it is getting out of the storage business

October 3, 2008

2 Min Read
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Japan's Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) is in talks to sell its struggling hard disk drive business to Western Digital Corp. (NYSE: WDC), according to reports from several news organizations. The potential price reportedly ranges from $660 million to $944 million.

The news was first reported by Japan's Nikkei news service, which cited company sources. It was followed by reports from the Reuters news service, which quoted a company source, and the Bloomberg news service, which cited three unnamed Fujitsu sources.

Such a sale would be the largest sell-off for a Japanese electronics company, Nikkei said. The unit, which competes with products from Seagate Technology Inc. (NYSE: STX), Western Digital Corp. (NYSE: WDC), Hitachi Global Storage Technologies (Hitachi GST) , IBM Corp. (NYSE: IBM), and others, has manufacturing plants in Japan, Thailand, and the Philippines with 15,000 workers and has been losing money. The reports caused Fujitsu's stock to jump more than 7 percent, Bloomberg reported.

The company issued a statement that said: "There is no truth at this time to the Nikkei report concerning our hard drive business."

The hard disk business currently faces tough price competition and is threatened further by the growing appeal of solid-state disks, which are being pushed by Intel Corp. (Nasdaq: INTC), Micron Technology Inc. (Nasdaq: MU), Samsung Corp. , and others as a replacement for hard drives in enterprise systems.Bloomberg quotes analysts as saying the deal, if it happens, would help Western Digital challenge Seagate's lead in the storage drive market. "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," Yukkihiko Shimada, an analyst at Mitsubishi UFJ Securities Co., told Bloomberg.

Seagate has around 34 percent of the global hard drive market in shipments last year, followed by Western Digital with 22 percent, according to iSuppli. Fujitsu was in sixth place with 6.9 percent.

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