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For Friction Over Chip Unit Sale, Western Digital CEO Apologized To Toshiba

For Friction Over Chip Unit Sale, Western Digital CEO Apologized To Toshiba
After the U.S. firm - Western Digital Corp, sued to keep their chip joint venture from being sold to rival bidders, the company’s CEO apologized to his counterpart at Toshiba Corp for strained ties, according to an Aug. 11 letter.
As it scrambles to cover liabilities at its bankrupt U.S. nuclear unit, the embattled Japanese conglomerate has put its chip unit up for sale as it scrambles. The unit is said to be worth between $17 billion to $18 billion.
However, as Toshiba entertained other bids, relations between Western Digital and its chips partner quickly frayed.
In mid-August, the two companies agreed to try to overcome their dispute and enter into serious discussions but it was not immediately clear what impact the letter had on relations between the two firms.
Toshiba said on Thursday that it would continue to talk to the Western Digital consortium as well as two other suitors and they failed to clinch a deal by end-August as planned. The other suiters included groups led by Bain Capital and by Taiwan’s Foxconn.
“I am not a litigious person by nature. Personally, I have never sued anyone,” Chief Executive Steve Milligan wrote in the letter, which was seen by the media.
 “I understand that the litigation and ongoing disputes have created significant ill will for some within Toshiba. This is regrettable and I am deeply sorry for the feelings this has created.”
There were no comments from Toshiba on the letter. She could not immediately comment, said a representative for Western Digital.
The U.S. firm would address any concerns that Apple Inc, a key customer of Toshiba’s NAND flash memory chips, might have about a deal, Milligan also sought to reassure Toshiba CEO Satoshi Tsunakawa in the letter.
If Toshiba, the world’s No. 2 producer of NAND chips, struck a deal with Western Digital, which ranks No. 3, Apple is likely concerned about being on the backfoot in pricing power, sources said

Sources with direct knowledge of the matter said this week that Apple has joined Bain’s consortium bidding for Toshiba’s chip unit.
Western Digital would have no voting rights or board seats and was only offering to hold convertible bonds in the chip business, Milligan said in the letter.
“Additionally, Western Digital will not have any ability to interfere in the management or operations of TMC, and we have no desire or expectations to the contrary,” he said.
“We are highly confident that Apple will understand this structure and be comforted by it,” he said, suggesting that the two sides meet with Apple to address any questions.
And a risk that Milligan cited as he said their differences were “down to only a very small number of outstanding issues” was the any delays to Toshiba clinching a deal could allow rival Samsung Electronics’ extend its lead in advanced 3D chips.
Once they had clinched a deal, he offered to drop all legal action on the part of Western Digital.
“As you know, time is not our friend,” he wrote. “The only people benefiting from this prolonged dispute are the competitors to our joint ventures.”

Christopher J. Mitchell

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