If they reach a deal, Toshiba would become the world's largest supplier of small hard disk drives, which are seeing growing demand for use in laptops, video recorders and car navigation systems.
"It is true that we are holding talks with Fujitsu on purchasing its hard disk business," Toshiba spokesman Keisuke Ohmori said, adding that nothing had been decided yet. A Fujitsu spokesman said the company was talking with several companies about its HDD business.
The Nikkei business daily estimated the value of the potential deal at 30-40 billion yen (340-450 million dollars). A deal could be announced at the end of January and completed by around April, it said.
Fujitsu has been trying to focus on core growth areas. In 2007 it announced it would end production of plasma televisions, a technology the company was the first in the world to sell, as competition had grown fierce. Japan's electronics giants are revamping their operations to cope with weak consumer demand amid the global economic downturn.
According to the Nikkei, Toshiba will log an operating loss of about 200 billion yen for the current financial year to March because of weak performance at its semiconductor business.
OneIndia News (With inputs from Agencies)