Seagate to pay Amstrad US$93 million for faulty disk drives

UK PC maker Amstrad has won a lawsuit against hard disk drive manufacturer Seagate in which it alleged that faulty drives supplied in the late 1980s severely harmed Amstrad's reputation as maker of reliable systems.

Disk drive maker Seagate Technology has lost a long-standing lawsuit that the UK electronics firm Amstrad brought against it, officials have announced.

Under the terms of the settlement -- which the High Court of Justice, Queen's Bench Division Official Referees' Court announced last Friday -- Seagate will pay Amstrad £57.56 million. In addition, Seagate may have to pay interest and costs, which could increase the amount by another $60 million, Amstrad officials say.

Seagate is currently considering filing an appeal, Seagate officials say. However, whether the company files an appeal or not, the multi-million dollar payment to Amstrad will show up as a charge on the company's financial results this quarter, according to Seagate.

The lawsuit, which Amstrad filed against Seagate and its Singaporean subsidiary in 1992, was based on a claim that Seagate sold the company faulty disk drives during 1988 and 1989, Amstrad says. Amstrad claimed that a purchase of 56,660 faulty Seagate ST277R hard disk drives in early 1988 caused the majority of its flagship PC2386 desktop PCs to malfunction. This led to lost sales and considerable damage to Amstrad's early reputation as a reliable PC manufacturer, Amstrad officials say.

"Nobody will ever know where Amstrad would be today if this had not happened," says Amstrad's chairman, Alan Sugar, in a written statement concerning the court case.

The company has also taken legal action against disk-drive maker Western Digital, which it claims also provided faulty disk drives during the same period. The case will go to trial later this year in California, Amstrad officials say. In the same statement, Sugar acknowledges that the situation was an "an incredible coincidence" wherein two different suppliers both shipped bad hard drives to Amstrad.

While Amstrad is pleased with the outcome of the case, it says the sum awarded will not replace the amount of money it could have made if it had been able to establish itself as a reputable PC maker in the late eighties. Amstrad estimates that it lost approximately £75 million due to missed and delayed sales of its PC2386 alone.

"The financial award we have received only goes some way to compensate us," Sugar says in the statement. "Perhaps as importantly, the decision exonerates myself and my team."

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