Fujitsu May Sell Disk Drive Unit: Reports

Reports that Japanese technology giant Fujitsu is in talks to sell its sluggish hard disk drive business to U.S. storage firm Western Digital (WDC Quote - Cramer on WDC - Stock Picks) have been met with approval from both investors and analysts.

The news, which comes at a time of intense competition and tight profit margins in the hard disk drive space, pushed Fujitsu's shares up 4.7% in Tokyo trading.

The first indications of a possible deal came when Japan's Nikkei business daily reported that the two firms are negotiating a price of $662 million to $945 million. Reuters also reported that a sale could be completed by year's end, citing a Fujitsu source.

Fujitsu distanced itself from the Nikkei report earlier today, although there is clearly a new broom sweeping through the Japanese technology giant.

The company, which recently appointed Kuniaki Nozoe as its company president, is now on a mission to streamline its business, according to Needham research analyst Richard Kugele.

"It's important to remember that Fujitsu Ltd. has a new CEO and he seems determined to shift the focus," he says. "There has been speculation that he is moving to a software or a services model like IBM (IBM Quote - Cramer on IBM - Stock Picks)."

Fujitsu also faces stiff competition from the likes of Seagate (STX Quote - Cramer on STX - Stock Picks), Western Digital and Hitachi (HIT Quote - Cramer on HIT - Stock Picks) in the hard disk drive market, something which will only become tougher with the continuing use of notebook computers.

"It's not that Fujitsu is doing poorly, it's just a difficult space," says Kugele. "The world is moving to notebooks [and] the odds are that the U.S. guys that dominate the desktop will dominate the notebook."

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