UPDATE 1-Fujitsu says no deal with Western Digital-Nikkei

Fri Dec 26, 2008 8:38pm GMT

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(Adds Western Digital comment, stock price)

SAN FRANCISCO Dec 26 (Reuters) - There is no chance that Japan's Fujitsu Ltd (6702.T) will sell its hard disk drive business to Western Digital Corp WDC.N, the Nikkei financial daily quoted Fujitsu President Kuniaki Nozoe as saying.

"I won't deny that we have had talks" with Western Digital, the Nikkei quoted Nozoe as saying.

"But at the moment, there is zero chance" of a deal.

A Western Digital representative characterized the story as "rumor" and said "Western Digital does not comment on rumors."

Western Digital's stock was at $11.32 in afternoon trading, up a cent from its opening level.

The two companies were in talks about such a deal in October, Reuters reported at the time. A company official had said the unit was a money loser for Fujitsu.

Fujitsu wanted to sell all its domestic and overseas hard-drive factories together and allow many of the workers to keep their jobs, the report said. It said the two sides could not reach agreement on these conditions.

The sharp appreciation of the yen made it more difficult for the parties to agree on a price, the Nikkei said.

The Nikkei said Fujitsu was believed to have asked for 50 billion yen ($550 million) or more after reporting the price as 70 billion yen or higher in October.

Fujitsu, with a 20 percent market share in hard drives, competes in a market that is dominated by Seagate Technology (STX.O), which has a 60 percent share.

Fujitsu withdrew from the market for desktop hard drives in 2001, facing rising development costs and steep price falls.

At the time, it sold some of its facilities to Western Digital to focus on drives for laptops and servers.

Other big players in the sector are Hitachi Ltd (6501.T) and Toshiba Corp (6502.T).

($=90.7 yen)

(Reporting by David Lawsky; Editing by Ted Kerr)

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