Japan’s Toshiba is in advanced talks to buy Fujitsu’s hard disk drive business. That would make it the world’s largest producer of small hard drives for consumer electronics.

The price is said to be around US$336m-$448m. For Fujitsu it means getting out of a loss-making hardware business. Toshiba becomes the biggest player in this field.

In a sense it has a two way bet going. Toshiba is one of the world’s largest makers of the ‘flash memory’ computer chips used for storage in mobile phones and digital cameras.

Flash memory is certain to expand more and more into notebook computers. Hard drives will continue, for the time being, to be for applications that need a lot of storage space, such as the servers used by big companies.

Fujitsu’s hard drives business has made lossesin the last couple of years because of a rapid fall in prices. Toshiba’s existing hard drives business is marginally profitable, but analysts expect it to lose money this year.

One concern wass how much Toshiba will be able to cut costs because it means a lot of Fujitsu employees will be in excess of requirements and Fujitsu is opposed to termination for any of its employees.

There is a way around this. Now Toshiba is only expected to buy Fujitsu’s hard disk assembly business, which has factories in Thailand and the Philippines, rather than the more sensitive Japanese factories.

Toshiba is also spending hundreds of millions of dollars to increase its share in a flash memory joint venture and build a lithium-ion battery business from scratch.

Related:

Entry was posted on Wednesday, January 14th, 2009 at 8:20 pm under Technology.

Read more entries by Gareth Powell.
Stumble It!