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Toshiba Corp. has reached a settlement with personal computer users in the United States over a flaw in its notebook computers, Japan’s leading computer maker announced Friday.

The compromise will cost Toshiba, the leading notebook PC maker in the U.S., about 110 billion yen ($1 billion), Toshiba officials said.

In March, two American users of Toshiba PCs filed a lawsuit claiming that a defective integrated circuit in the computers’ floppy disk controllers had the potential to destroy data.

Toshiba decided to compromise after learning that its personal computers can “theoretically” develop the failure pointed out by the plaintiffs. The firm also said that so far it has received no complaints about the flaw.

At any rate, the settlement hits hard at Toshiba’s bottom line. The company will report the 110 billion yen settlement as a special loss in the current business year and try to partially offset it by selling 50 billion yen worth of assets.

Accordingly, Toshiba is revising its forecast for consolidated pretax losses from 10 billion yen to 70 billion yen for the current business year, which ends March 31. It also expects net profits of 15 billion yen, down from 50 billion yen.

“It is extremely regrettable (to have to pay) for something that does not really happen,” said Toshiba President Taizo Nishimuro. “But it became clear that there is a theoretical possibility (the failure could occur). We made the decision that we could not help but follow the American legal system.”

Nishimuro said that in the U.S., if there is a possibility that damage may be inflicted on consumers, the manufacturer may be forced to pay legal compensation. He also lamented that jury trials in the U.S. can lead to huge damage payouts.

“We wanted to fight it through,” he said, ‘but if we lost the legal battle, the damage could cost us as much as 1 trillion yen, which could put our company in critical condition.”

Out of the 6 million computers Toshiba has sold in the U.S., about 5 million notebooks are subject to the claim.

Under the settlement, Toshiba must use new FDCs in PCs it makes for the U.S. market after Nov. 8. It will also give coupons to customers for software correction costs.

In addition, Toshiba must make corrective software available for free over the Internet and make repairs to other affected computers free of charge.

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