Hitachi to go it alone in hard drives

Having posted its first quarterly profit in hard drives after seven consecutive quarters of losses, Hitachi has ended talks with private equity company Silver Lake about it taking a stake in the Hitachi HDD unit, according to Reuters.

The ending of the talks has exposed a faultline at the top of Hitachi. The hard disk drive (HDD) unit was bought from IBM in 2002 for $2 billion and has not made an annual profit since then. Hitachi Chairman Etsuhiko Shoyama (pictured) presided over the acquisition. It made Hitachi the number three HDD manufacturer globally.

Shoyama has talked of it taking time to bring the HDD unit into profit. However six years is quite a long time for this to happen.

The recurring losses prompted Hitachi president Kazuo Furukawa (pictured below) to sanction talks with Silver Lake about it possibly taking a stake in the HDD unit and injecting fresh ideas.

After seven consecutive quarters of losses the HDD unit made its first profit in the last calendar quarter of 2007, earning $95 million compared to a $93 million loss in the last quarter of 2006. Over the same period Seagate and Western Digital, numbers 1 and 2 in the industry, made increased profits as both PC and consumer disk drive storage sales soared.

This has given ammunition to people in Hitachi opposed to the Silver Lake talks, who assert that the corner has been turned and the HDD unit is now on the road to profits for the 2008 calendar year.

It appears that the Hitachi chairman and its president are at odds.

Neither Hitachi nor Silver Lake commented on the story which is attributed to persons familiar with the situation.

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