Hitachi mulls comeback for struggling hard-disk unit

Hitachi, Japan's biggest electronics conglomerate, has not posted a profit in its hard disk drive (HDD) business in any year since buying it from IBM for $2 billion in 2002.

According to several financial industry sources, investment bank Merrill Lynch has sounded out private equity funds that may be interested in the unit.

The Carlyle Group, Kohlberg Kravis Roberts, Bain Capital, and Silver Lake are among funds cited as possible investors, the sources said.

Hitachi may seek a fund to buy an equity stake in the hard disk drive business and then work with the fund to help revive it, one financial industry source said.

It was not immediately clear whether Hitachi would look to sell the entire business or just part of it.

"The negotiations have just started. It is unclear what the outcome will be," said one source.

Merrill Lynch Japan Securities spokesman Tsukasa Noda said he could not confirm whether the bank was involved in any such deal.

A Hitachi spokesperson declined to comment.

Hitachi's HDD unit lost $375 million in calendar 2006, a 60 percent bigger loss from the previous year, hurt by sliding prices for drives as laptop makers turn to flash memory drives for cooler and faster storage.