TAKEOVERS: RUMOR AND FACT : Western Digital Spokesman Declines to Discuss Speculation on Acquisition

Times Staff Writer

A top executive at Western Digital Corp. declined Tuesday to discuss recent Wall Street speculation that the Irvine computer products manufacturer may be the target of an acquisition attempt by another company.

The price of Western Digital stock has gyrated in unusually heavy trading as a result of takeover speculation and differing interpretations of recent remarks made by Western Digital Chairman Roger Johnson to securities analysts.

During a March 13 conference call with a number of analysts, Johnson declined to comment when asked if his firm would consider a buyout, according to one participant. But Johnson told the group that the company had not received any “written” acquisition offers.

Johnson’s statements caused some analysts to assume that Western Digital might have received a verbal buyout offer, fueling takeover speculation that had been swirling around the company for several days.


On Tuesday, however, Western Digital Treasurer John Markovich told the Dow Jones News Service that Johnson meant to say that Western Digital had received no buyout offers, either written or oral.

When contacted by The Times, Markovich, the company’s investor relations spokesman, declined to confirm the Dow Jones report. Johnson was not available for comment.

According to John Dean, an analyst at Montgomery Securities in San Francisco, speculation about the March 13 conference call contributed to unusual trading activity during the week before the session, which Markovich said was planned several weeks in advance.

The number of Western Digital shares changing hands on the American Stock Exchange jumped from 267,100 shares during the first week of March to 1.1 million shares during the week before Johnson’s remarks to the analysts. Another 1.1 million shares were traded last week.


The price of Western Digital stock dipped to $10.625 per share last Wednesday, a 3-year low. The stock has since rebounded, closing Tuesday at $12.50 per share. Volume topped 480,000 shares Tuesday.

Several analysts said continuing takeover speculation has contributed to the unusual activity. The company is considered more vulnerable than in the past because its stock price has been depressed.

Richard Stasand, an analyst at Diehl & Co. in Newport Beach, said the heavy trading activity could simply reflect bullish recommendations by analysts who follow the company. On the other hand, he said, “someone might be accumulating the stock” with the intent of profiting from a possible takeover attempt.

Analysts said the most frequently mentioned potential suitor is American Telephone & Telegraph, which has worked jointly with Western Digital and in 1987 agreed to supply the company with at least $50 million in computer chips a year.


AT&T; earlier this year purchased the data-communications equipment firm Paradyne Corp. through a tender offer valued at $250 million. At the time, analysts said AT&T; might make more acquisitions.

An AT&T; spokeswoman declined to comment on the speculation that it might be interested in acquiring Western Digital.

Stasand said it seems unlikely that AT&T; would be buying Western Digital shares in the open market. “It seems that AT&T; or someone with their muscle would just walk in the board room and say, ‘We’d like to make a tender offer for your stock.’ ” Stasand said.

Besides fielding questions about possible acquisition, Johnson told analysts participating in last week’s conference call that Western Digital expected revenue for the fiscal third quarter to be as much as $25 million lower than the $258.4 million reported during the previous 3 months.


On Tuesday, Markovich declined to confirm that a revenue projection was ever made. He said no public statements will be made until April 20 regarding performance for the third quarter, which ends this month.