Western Digital told to pay $525 million in arbitration

A Western Digital Corporation hard drive is pictured here in Encinitas, California April 19, 2011.

(Reuters) - Hard drive maker Western Digital Corp said it was asked to pay $525 million in an arbitration brought by competitor Seagate Technology LLC, but analysts said it was still a long way to go before the matter was resolved.

The award involves claims brought against Western Digital and one employee -- who was earlier with Seagate -- alleging misappropriation of confidential information and trade secrets, Western Digital said in a statement on Monday.

However, analyst Kaushik Roy of Merriman Capital said it is hard to prove confidential information was misappropriated if an employee joins a competitor.

Western Digital said it will "vigorously" challenge the award, but ThinkEquity analyst Rajesh Ghai said the process may take three months to a year to complete.

"The action was initiated in 2006 by Seagate in the Minnesota Fourth Judicial District Court. The litigation was stayed and the matter became an arbitration proceeding in 2007," a Western Digital spokesperson said in an email.

"These kind of settlements do keep happening and they have an impact on the cash balances, but beyond that nobody really cares," Ghai said.

"In terms of competitiveness, there is no impact here."

As of September 30, Irvine, California-based Western Digital had cash and cash equivalents of $3.68 billion.

"We do not believe there is any basis in law or fact for the damage award of the arbitrator," Western Digital Chief Executive John Coyne said in a statement.

Shares of the company were down about 2 percent at $25.53 in afternoon trade on Monday on the New York Stock Exchange. Seagate shares were trading flat at $15.90 on Nasdaq.

(Reporting by Supantha Mukherjee, Himank Sharma and Swetha Gopinath in Bangalore; Editing by Saumyadeb Chakrabarty and Joyjeet Das)