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Western Digital Corp. plans to challenge a $525-million ruling recently rendered by arbitrators against the Irvine-based disk drive maker for “misappropriation of confidential information and trade secrets.”
The claims were pressed by chief rival Seagate Technology LLC of Scotts Valley. They involve a former employee, according to a filing with the Securities and Exchange Commission.
“We do not believe there is any basis in law or fact for the damage award of the arbitrator,” said Western Digital President and Chief Executive John Coyne. “We believe the company acted properly at all times and we will vigorously challenge the award.”
Investors sent Western Digital shares down 1.7% in early afternoon New York trading on word of the judgment to a market value of about $6 billion. Its shares closed flat.
The ruling is the latest in string of setbacks facing the company as it struggles to regain operations in Thailand, where it produces about 60% of its drives.
Western Digital is in jeopardy of losing its title as the world’s largest disk drive maker this quarter as production plants in Thailand remain closed due to severe flooding and equipment damage.
The company has held the market share lead over Seagate for nearly two years. It could slip to No. 3 or No. 4 worldwide, according to El Segundo-based market tracker iSuppli Corp., a unit of IHS Inc.
Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics.
It is set to acquire San Jose-based Hitachi Global Storage Technologies Ltd. in a $4.3 billion deal that would make it the undisputed leader in drives.
It leads by number of drives shipped but is second in revenue to Seagate, which leads on sales of the more-expensive corporate drives.
The Hitachi deal is expected to close in coming months.
Western Digital executives said the judgment would not affect operations, the ongoing recovery of its Thailand plants, or its planned buy of Hitachi Global.
Its recent guidance on the current quarter shed some light on a grim situation in Thailand, which is struggling with flooding caused by a heavier-than-usual monsoon season punctuated by typhoons.
Executives said Western Digital expects to ship between 22 million and 26 million hard drives in the December quarter, down nearly 59% from the prior period.
Western Digital projects revenue in the December quarter between $1 billion and $1.25 billion, down from $2.47 billion a year earlier.
Western Digital projects a loss between $257 million and $292 million for the quarter, in line with Wall Street estimates.
It posted an adjusted profit of $225 million a year ago.