|Home > News|
|Home > News|
Friday, April 18, 2008
Ailing Hitachi subsidiary spurns U.S. fund's offer
Hitachi Global Storage Technologies Inc., a U.S.-based hard-disk drive subsidiary of electronics giant Hitachi Ltd., said Thursday it will rebuild its business on its own, denying rumors it will sell part of its shares to U.S. investment fund Silver Lake Partners.
Hitachi had been in talks with the investment fund to sell close to 50 percent of HGST's shares as it struggles to turn around the loss-making HDD division.
"We consulted with (parent) Hitachi and came to the conclusion that we should rebuild the business by ourselves," Hiroaki Nakanishi, HGST chief executive officer, said in Tokyo.
Negotiations failed because the two sides reportedly could not agree on the valuation of the company and arrive at a satisfactory share price.
But Nakanishi said he would not rule out using outside capital to aid HGST's recovery in the future.
HGST, based in California, was created in 2003 after Hitachi acquired the HDD division of IBM Corp. and integrated the division with its own hard-drive operations.
Hitachi's digital media division has been in the red for the past few years. In business 2005, it booked a ¥35.8 billion operating loss, which ballooned to ¥58.4 billion in business 2006.
The operating loss is expected to almost double to ¥98 billion in business 2007, which ended in March, according to Hitachi's February forecast.
But Nakanishi stressed that HGST posted a July-December profit of $37 million and also made a profit in the three months to March.
But Tomoyuki Fujii, an analyst at Okasan Securities Co., said he is skeptical whether HGST can go into the black this business year.
"The reason it is increasing profit is because the industry itself is expanding," Fujii said. "I'm not sure if it is purely because of company management."
Fujii also pointed out that HGST's productivity per employee is still lower than that of rivals Seagate Technology LLC and Western Digital Corp.