Oct. 2 (Bloomberg) -- Fujitsu Ltd. is in talks to sell its unprofitable storage-drive business to Western Digital Corp., three Fujitsu executives said, asking not to be identified because the discussions are preliminary.

The executives declined to comment on the sale price after the Nikkei newspaper said today the business may fetch 70 billion yen ($659 million) to 100 billion yen. Tokyo-based Fujitsu said in a statement that the report had ``no factual basis.''

Fujitsu rose as much as 7.2 percent in Tokyo trading as Deutsche Bank AG and JPMorgan Chase & Co. said a sale may help raise investor confidence over management's commitment to boost earnings. A purchase may help Western Digital challenge Seagate Technology's lead in a storage-drive industry that's facing falling prices and competition from flash memory chipmakers.

``It's necessary for Fujitsu to review its disk-drive operations because it's facing severe competition in an industry that requires large commitments to capital spending for companies to be competitive,'' said Yukihiko Shimada, an analyst at Mitsubishi UFJ Securities Co., who rates the company ``outperform.''

The sale would include plants in Japan, the Philippines and Thailand with 15,000 workers, the Nikkei reported, without saying where it obtained the information. It would be the largest business-unit sale by a Japanese electronics maker and raise Western Digital's market share to almost the same as market leader Seagate Technology, Nikkei reported.

Acquisition Rumors

Western Digital doesn't comment on rumors, Steve Shattuck, a spokesman for the Lake Forest, California-based company, said in an e-mail.

Fujitsu, Japan's largest computer-services company, gained 5.2 percent to 631 yen at 2:12 p.m. on the Tokyo Stock Exchange, compared with a 1.1 percent decline in the Nikkei 225 Stock Average. Western Digital fell 3.4 percent to $20.60 on the New York Stock Exchange yesterday.

Fujitsu, which doesn't disclose profitability at the disk- drive unit, forecast on July 31 that the business will turn around from a loss and report ``several billion yen'' in operating income in the year ending March 31.

Sales at the unit are projected to rise 11 percent to 370 billion yen this fiscal year, accounting for about 7 percent of revenue, Chief Financial Officer Kazuhiko Kato said at the time.

Seagate, which bough Maxtor Corp. last year, had a 34 percent share of the global hard-disk drive market by shipments in 2007, followed by Western Digital with 22 percent, according to researcher ISuppli Corp. Fujitsu was ranked sixth with a 6.9 percent share.

To contact the reporter on this story: Mikako Nakajima in Tokyo at mikako@bloomberg.net.

Last Updated: October 2, 2008 01:18 EDT