Investors Sue Western Digital in Class Action

Investors who bought shares in Western Digital Corp. during a yearlong period said Sunday they had filed a federal class-action lawsuit against the Irvine maker of computer hard drives.

The complaint, filed Friday in U.S. District Court, alleges that Western Digital issued false and misleading press releases and financial statements for 1996 and 1997.

The lawsuit also alleges the company improperly deferred the write-down of its inventory of obsolete hard drives.

As a result, the lawsuit alleges the price of Western Digital’s stock was “substantially artificially” inflated between Dec. 28, 1996, and Dec. 2, 1997.

“We can’t comment on the specifics, since we haven’t reviewed the suit yet. But we will vigorously defend ourselves against anything like that,” said Robert J. Blair, a spokesman for Western Digital. “We certainly take seriously the decline in our market value in recent months.”

The complaint also alleges that Western Digital insiders disposed of thousands of their own shares of company stock at artificially inflated prices.

About five months ago, Western Digital’s stock hit a 52-week high of $54 a share. But then changing stock market conditions, a change in corporate focus and a shift in hard drive buying trends have all hurt the company. Western Digital barely broke even for the second fiscal quarter. The stock closed at $15.75 a share in New York Stock Exchange trading on Friday.

The plaintiffs, represented by New York law firm Wechsler Harwood Halebian & Feffer, seek to recover unspecified damages.