Toshiba Warns Of Special Loss By Yuzo Saeki

TOKYO (Reuters) - Toshiba Corp Friday announced a $1 billion special loss for 1999/2000 to settle a U.S. lawsuit over its notebook computers, triggering a credit rating downgrade and a nine percent slide in the electronic giant's share price.

In a further setback after unveiling dismal half-year earnings three days ago, Toshiba said Friday it would incur a 110 billion yen ($1.05 billion) special loss from the lawsuit, while trimming its annual earnings estimates.

Two U.S. owners of Toshiba notebook personal computers brought the class-action lawsuit earlier this year, alleging that a condition in the micro-code for the floppy disk controller may cause data in a floppy disk to be lost or corrupted.

Under the settlement, Toshiba will incorporate new floppy disk controllers in PCs for sale in the United States and provide eligible PC owners with coupons ranging from $100 to $225.

SETTLEMENT PROMPTS MOODY'S ACTION

Toshiba said it decided to settle the case without a final jury verdict because there was ``a serious risk that a substantial amount of compensation could be awarded through a jury verdict'' and ``Toshiba wants to continue to ensure its customers that the Toshiba brand name merits their trust.''

Moody's Investors Service quickly responded to the news by cutting the Japanese company's long and short-term credit ratings and putting Toshiba on review for a possible further downgrade.

``The downgrades were prompted by Toshiba's announcement today that Toshiba has reached a settlement in a class-action lawsuit in the U.S. concerning the floppy-disk drive controller incorporated in its notebook PCs,'' the U.S. ratings agency said.

Toshiba's loss warnings and the downgrade by Moody's erased early-morning gains in the company's shares, driving the stock down at one point as much as nine percent. It recovered some ground by the close to end at 656 yen, off 6.15 percent.

Toshiba president Taizo Nishimuro said the company could have ended up paying US$8.8 billion if it had waited for the jury's verdict and the jury had come out in favor of the plaintiff.

He added that as a result of the losses the company needed to speed up its restructuring efforts, but he did not elaborate on this and many analysts have been critical of Toshiba for taking a slow approach to restructuring its semiconductor business.

Toshiba's semiconductor operations have been hit hard by a faster-than-expected fall in computer memory chips, known as dynamic random access memory (DRAM) chips.

The company has it would post a special loss of about 55 billion yen in the current business year partly to revamp its chip business and a restructure its home electronics and appliance unit.

Tuesday, Toshiba announced it had sunk deeper into the red in the six months to September, posting a first-half parent net loss of 49.12 billion yen, against a 6.40 billion yen loss in the same period a year ago.

This loss would swell to 65 billion yen for the year to March, 2000, the company said Friday, revising an earlier forecast for a 30 billion yen loss.

Hit hard by the slumping semiconductor business, Toshiba said earlier this week it would pay no interim dividend. Reut08:59 10-29-99

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-- Bill P (porterwn@one.net), October 29, 1999

Answers

Soooooo cooooolll! My Toshiba VCR was a piece of garbage, so it doesn't surprise me that its laptops are garbage as well.

-- haha (haha@haha.com), October 29, 1999.

Too bad Compaq hasen't been crucified by a jury for the '96-'97 Presario debacle!

-- z (z@z.net), October 29, 1999.

Hey, I got a 96/97 vintage Presario. What was the debacle? What should I be watching out for?

-- Ella Martz (egm@idaho.gov), October 29, 1999.

Ella,

On some of the Motherboards there is a timing problem...the product is defective. If you have to ask that question, your Presario isn't defective.

I had to reformat my hard drive more than 70 times and reinstall the entire software suite each time. Then I read that the 4000 series had this problem, went to Yahoo, typed in Compaq on the search...and found out about the class action Law Suit covering people who purchased Presarios in the '96/'97 time frame.

But it sounds as if your system works. Yhe real reason I "got it" on Y2K is all the problems with the computer, and all the attempts to lay the blame somewhere else. I realized that for the average company, with so so software skills, their vendors will be pointing fingers elsewhere instead of fixing anything.

-- K. Stevens (kstevens@ It's ALL going away in January.com), October 29, 1999.