Hitachi, Silver Lake in talks about hard drives, sources say

Investment firm is rumored to be looking seriously into buying a large stake of the tech conglomerate's loss-making disk drive unit.

Japan's biggest electronics conglomerate, Hitachi, is talking to U.S. private-equity firm Silver Lake about the possibility of selling it a stake in its hard-drive unit, sources familiar with the situation said Friday.

Hitachi has been considering selling a stake in the loss-making unit to bring in fresh capital and expertise. Reuters first reported in September that Hitachi had sounded out investment funds, including Silver Lake, about a possible deal.

Silver Lake, which focuses solely on making large-scale investments in technology companies, has been granted the chance to look at the hard-drive unit to better be able to come up with ideas to help turn around the business.

Negotiations are still at an early stage and may still not bear fruit, at which point other private-equity funds may offer up their solutions to the hard-drive unit's woes.

Hitachi said in a statement that it is studying various measures to improve its hard-drive business but that nothing had been decided.

Investors welcomed the report as a sign that Hitachi was taking steps to deal with poorly performing units, boosting shares of Hitachi.

Earlier, the Nikkei business daily reported that Hitachi would likely sell a stake of just less than 50 percent to Silver Lake.

"The report says it's not the sale of the entire (hard disk drive) business, and uncertainties about the deal remain, but still, it would mark a step forward in Hitachi's revival," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

Hitachi has not posted a profit in its hard-drive business since buying it from IBM for $2 billion in 2002, as disk drive prices have crumbled.

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