Western Digital, IBM Establish Strategic Link

Western Digital Corp. said Monday that it will team up with IBM Corp. to build new disk drives for personal computers.

IBM will sell Western Digital a series of computer components that read data from and write data to the disk and allow the computer’s disk drives to store more information than older techniques.

Financial terms of the agreement were not disclosed. In New York Stock Exchange trading, Western Digital stock rose 25 cents, closing at $19.88 a share; IBM shares fell 25 cents to $116.63.

Analysts say the proposed deal allows IBM access to new outlets to distribute its products and gives Western Digital a jump on emerging technologies and manufacturing lead-in time.

Western Digital, one of the largest players in the disk-drive market, has suffered financially for more than seven months as its industry has been battered by oversupply and weak demand.

“It’s an excellent agreement for both of them,” said Matthew Russo, an analyst with Sands Bros. & Co. “It also helps that there was a preexisting tie between the two [firms].”

That link is Chuck Haggerty, chief executive of Western Digital and a former IBM vice president. Haggerty, who worked at Big Blue for 28 years before joining Western Digital, said he had been in talks with IBM staff about the proposed agreement for the last six months.

“This gives us an advantage: to be able to introduce our products much faster--as much as six months faster,” said Haggerty, who expects the new product line to be introduced in 1999.

To thrive in this boom-bust industry, Western Digital and its rivals must continue to develop faster, larger and more powerful drives as the appetite for data storage increases with the proliferation of computers in the office and the home. And often, they must bring them out quicker than the competition.

The industry’s current glut of troubles also have hurt Western Digital’s rivals, namely Seagate Technology Inc. and Quantum Corp. Industry-wide profits and revenue aren’t expected to rebound for at least another six months.

“This gives Western Digital a leg up by being very closely aligned to IBM’s technology group,” said analyst David Takata at Gruntal & Co.