Western Digital, Japanese Firm Cut a Disk Deal : Manufacturing: Giant Nippon Steel will provide financial and technical support to develop 1.8-inch drives. And the Irvine firm gains access to Japan’s markets.

IRVINE — Western Digital Corp., a struggling computer products manufacturer, received a helping hand from across the Pacific on Wednesday by signing a deal to develop a new generation of miniature computer disk drives with Tokyo-based Nippon Steel Corp.

Under the agreement, Nippon Steel will provide financial and technical support to Western Digital to develop 1.8-inch disk drives in exchange for unspecified license rights to market or make some of the products. Disk drives, which store data on computers, account for roughly two-thirds of Western Digital’s estimated $1 billion in annual revenue.

Though Western Digital officials declined to say exactly how much money Nippon Steel will contribute, the deal is expected to provide financial support so Western Digital can more easily invest in new technologies despite its difficult financial position.

“With this agreement, we get access to the Japanese market, their technology and finances,” said Roger W. Johnson, chairman of Western Digital.

Johnson said cost savings for Western Digital from the sharing of development costs with Nippon Steel aren’t likely to be significant, but he said that the strategic partnership could be extremely important in enabling the company to bring the products to market faster and penetrate the Japanese disk-drive market.

Nippon Steel is the world’s largest steelmaker with sales estimated at $10 billion for fiscal 1993. In a diversification begun four years ago, the company expanded its businesses to include electronics and communications.

“Western Digital has been strapped for cash, but you don’t slow down in this industry,” said Jim Porter, president of Disk/Trend Inc., a market research firm in Mountain View. “You have to plunge ahead. To be a player in the (portable) computer market, they have to go into the 1.8-inch disk drive market.”

Johnson has been seeking a strategic partner to invest in the company since last year so that it can keep pace with larger disk-drive manufacturers. But Johnson said Wednesday that such a partnership is no longer necessary for Western Digital to survive.

Disk-drive makers Seagate Technology in Scotts Valley, Quantum Corp. in Milpitas and Conner Peripherals Inc. in San Jose are all expected to launch 1.8-inch disk drives this year, Porter said.

Since 1.8-inch drives are expected to be faster, require less power, and be more compact than previous generations of drives, they are expected to lead to smaller, faster and more efficient portable computers.

Hurt by the recession and a withering price war in the slumping computer industry, Western Digital lost $58.3 million for the six months ended Dec. 28, compared to a loss of $96.8 million for the year-earlier period. Revenue fell to $415.4 million, down 14% from $485.7 million a year earlier.

Western Digital plans to release its third-quarter results in the next week. A year ago, the company reported a $10.8-million third-quarter loss. Johnson said the company’s financial restructuring plan, which forecasts a return to profitability by the end of the 1992 fiscal year ending June 30, is on track.

Johnson said the company expects to sell about $44 million worth of semiconductor chips to Japanese companies for the 1992 fiscal year, compared to about $38.9 million sold a year earlier. With sales of disk drives on the horizon, Johnson said he hopes to triple sales to Japanese customers to about $150 million a year over the next several years.

In the past, Western Digital and other U.S. disk-drive makers have not done well in the Japanese market, partly because Japan’s largest computer makers often make their own disk drives, analysts said.

Kathryn A. Braun, executive vice president, said Western Digital plans to produce the 1.8-inch line of disk drives in volume by the end of this year.