Ravaged by the bloodbath in the small form factor disk drive market, Western Digital Corp, which sold its local networking chips and boards business to Standard Microsystems Corp a couple of years ago, has had to sell another of the crown jewels. This time it is the Irvine, California company’s wafer fabrication plant, which is going to El Segundo, California-based Rockwell International Corp for about $115m plus assumption of equipment leases on the facility. The letter of intent also includes a three-year supply contract for continued delivery of processed silicon wafers to Western Digital. Rockwell already has a wafer fabrication facility in Newport Beach, California but wants the new one as part of its efforts to apply integrated advanced circuitry to the personal electronics market, where the company is majoring on telecommunications products. The confluence of communications, entertainment, computers, financial transactions, travel, shopping, financial brokerage transactions and business communications will be a huge market, Rockwell says: We’re at the beginning of a wave that could develop into a home and office market in the tens of billions of dollars. It says it plans to invest several hundreds of millions of dollars more over the next few years to increase the plant’s capacity. Its telecommunications arm supplies components for modems for computers and facsimile machines and contributes about $500m of Rockwell’s $11,000m annual sales. Rockwell says it is also developing new digital processes to enhance the capabilities and clarity of mobile communications and sees commercial applications for its global positioning equipment. Western Digital’s sale of the 225,000-square foot plant near its Irvine headquarters would take it out of chip-making for the first time since its foundation 23 years ago. Proceeds would be used to repay bank debt and significantly improve its balance sheet. Western Digital made a loss of $37.8m in its fiscal fourth quarter to June 30, and total debt stood at $137m.
