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Toshiba to Fight Mainland Lawsuits Over Faulty Drives
Toshiba Corp will fight lawsuits filed in the mainland over defective floppy disk drives in its notebook computers, the same issue that cost the company US$1 billion in settlements with United States consumers last year.
The world's biggest notebook-computer maker had no plans to settle the six mainland suits out of court and had already sent software to users seeking a solution, president Tadashi Okamura said.
"We will tell the courts that we have done all we could do" to minimize users' inconvenience, he said.
Analysts warn the move is likely to anger mainland consumers and may lead to them refusing to buy Toshiba products. Mainland online and state media have criticized Toshiba for "discrimination" after it refused to compensate mainland consumers for a disk drive flaw in its laptop computers as it did in the US.
The US$1 billion charge from the US lawsuit resulted in a 28 billion yen (about HK$2 billion) group net loss in the year to March 31.
Analysts say the mainland suits will not cost as much, as Toshiba had only sold 200,000 personal computers there as of March, compared with 15 million worldwide last year.
The real loss may be damage to Toshiba's brand image in the world's most populous country.
"Toshiba must solve this issue as soon as possible because the longer it takes, the more likely it is that Chinese anger will rise," said Hiroyasu Nishikawa, an analyst at Cosmo Securities.
Three individuals and three corporate customers in Beijing and Shanghai filed suits between May and this month, alleging that faulty software in the floppy disk controllers of Toshiba notebook PCs could cause data to be lost or damaged as it was saved to a floppy disk.
This was the same problem cited in the US suit.
No customer complaints of lost data were ever filed with Toshiba.
The mainland is one of the most attractive markets for Toshiba, as the country's rapid economic growth - 7.1 per cent year on year last year and 8.2 per cent in the six months to June - has given rise to expectations of robust sales of PCs and home appliances.
"The scariest thing for Toshiba is that Chinese consumers may stop buying Toshiba's products," said Yoshiharu Izumi, an analyst at UBS Warburg LLC.
Asia, excluding Japan, accounted for 11 per cent of Toshiba's group sales in the year to March 31. The mainland and Thailand are Toshiba's biggest markets in Asia outside Japan.
Toshiba on Monday raised its forecast of group net income in the year to March next year by 35 per cent to 135 billion yen or 42 yen per share.
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