Western Digital to Settle Dispute

Hard drive manufacturer Western Digital Corp. said Monday that it would pay $45 million to settle a legal dispute over whether computer chip maker Cirrus Logic Inc. overcharged for some of the components it made for disk drives.

Western Digital, the Lake Forest company whose hard drives are used by Hewlett-Packard Co., Dell Corp. and Microsoft Corp., canceled its orders with Cirrus Logic in July 2001 and filed suit in Orange County Superior Court, alleging the chip maker breached their contract by seeking higher prices than had been agreed upon.

Austin, Texas-based Cirrus Logic countersued one month later, seeking about $53 million for chips it had already supplied to Western Digital.

Western Digital Chief Executive Matt Massengill said he was pleased the settlement would end “the continued expense and distraction of this litigation and potential trial.” A trial had been scheduled for December.

The company had set aside $26.5 million to cover expenses related to the dispute. The difference of $18.5 million is being charged to the company’s fourth fiscal quarter, which ended June 27.

The charge forced the company to restate its earnings for the fourth quarter, to $31 million from $48.8 million. For the full year, profit was revised to $182 million from $200 million.

Western Digital took in $2.7 billion in revenue in its 2003 fiscal year, 90% of which came from selling hard drives for desktop computers and personal video recorders, said spokesman Scott Shattuck. The other 10% of sales were to Microsoft for its Xbox video game console.

Shares of Western Digital dipped 33 cents to $8.92 on the New York Stock Exchange, while shares of Cirrus Logic slipped 3 cents to $5.28 on Nasdaq.