Western Digital Stock Drops to Year Low : Technology: Sales of key products are down. Rumors of a delay in an IBM deal and a new Intel product have hurt.

Sluggish sales of some key products and industry rumors have combined to drive down Western Digital Corp.’s stock to its lowest closing price in 52 weeks.

Robert J. Blair, a spokesman for Irvine-based Western Digital, confirmed Tuesday that sales of the company’s computer disk drives and several other products have been slower than anticipated. As a result, he said, earnings for the first quarter, which ended Sept. 30, will be below most Wall Street estimates.

Western Digital stock closed Tuesday at $5.625 per share, down 50 cents on the American Stock Exchange. It has been as high as $14.75 the past year.

“Secondary technology stocks have been mercilessly punished in this current market when there is an expected earnings shortfall,” said Vincent L. Turzo, an analyst with Prescott, Ball & Turben, a Cleveland securities firm.

Turzo had been estimating earnings of $7.3 million for the first quarter. Now he doubts that Western Digital will reach that mark. The company expects to release its first-quarter results on Oct. 18.

Two other developments are helping to sour Wall Street on the Irvine-based computer products company, said Richard L. Whittington, an analyst at Kidder Peabody & Co. in New York.

International Business Machines Corp. is likely to delay production of its laptop computer until next year, according to industry analysts and the Wall Street Journal. Whittington and other analysts have said that Western Digital won a large contract to supply parts for IBM’s laptop.

Western Digital officials have refused to comment since speculation about a big IBM contract began this summer, sending the firm’s stock soaring. Western Digital Chairman Roger Johnson did say in July that the company was negotiating a manufacturing agreement with IBM.

Meanwhile, Intel Corp. on Wednesday is expected to unveil details about a much-anticipated set of computer microchips for laptop and notebook computers. The chips are expected to compete with a set produced by Western Digital.

Industry analysts said Intel is expected to announce two chips that will combine the functions of Intel’s 80386SX microprocessor--a powerful chip that is the brains of many personal computers--with three to five peripheral chips in a single package.

The space-saving chips would enable computer makers to build smaller, more powerful and energy-efficient machines for the laptop and notebook computer markets--the industry’s fastest-growing, analysts said.

Intel has a technological monopoly on the high-performance microprocessor market, but Western Digital and two dozen other companies make chips that control how the microprocessor communicates with peripheral devices such as printers.

By linking the microprocessor with the peripheral logic chips, Intel could take sales away from Western Digital, said Michael Slater, editor of the Microprocessor Report in Sebastopol. Logic chips made up about 6%--or about $66 million--of Western Digital’s sales for its fiscal year ended June 30.

Western Digital’s Blair declined to comment on the expected Intel announcement. But he said Intel’s new chip design--as described in various news reports--would not necessarily make Western Digital’s chip-design approach obsolete.

“The product direction of coupling the microprocessor with other functions is an avenue that may represent future opportunities for Western Digital’s interarchitecture approach,” he said. “We are already looking into ways we can participate without getting into making microprocessors. We think the two approaches can co-exist.”

Under its interarchitecture approach, Western Digital seeks to boost computers’ performance by designing different peripheral logic chips to work better together than if they were built by different companies. The company’s first chips designed by this approach are entering initial production.

With those chips, Western Digital has targeted laptops as one as its high-growth markets.

Lawrence Borgman, an analyst with Dillon Read & Co. in New York, said he expected Western Digital’s logic chip sales to double in the current fiscal year, regardless of the Intel announcement. He said the Intel chip set will put competitive pressure on Western Digital.