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Japanese conglomerate, Hitachi, may be in talks with Toshiba and Fujitsu on forming a new company dedicated to hard drives and storage systems. The new company would combine the limping hard drive divisions of Hitachi and Toshiba as well as some of the storage systems technology from Fujitsu. Each would own a third. The three-way deal is being proposed as an alternative to a private equity buyout. Hitachi has been in discussions with equity firm Silver Lake and others about spinning off its money-losing hard drive group, according to sources and news reports. Those talks, however, have not gone smoothly, sources familiar with the discussions said.

For one thing, Silver Lake has a long association with Seagate Technology. Silver Lake took Seagate private years ago, restructured the company, and spun it out again. Seagate is now profitable and growing. However, the firm and the company have stayed friends. Silver Lake founder Jim Davidson tendered his resignation from Seagate's board in December. A bigger problem, though, might be cultural. Hitachi is still run like a more traditional Japanese company. That is, the company is somewhat wary of outsiders, but is likely more willing to trust other Japanese partners. One observer noted that a Japanese conglomerate seems a better fit than other proposals that have floated about. Another observed that even though Silver Lake and Hitachi have translators, they probably still aren't speaking the same language.

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