Computer giant IBM has said it will close its hard disk drive company in Hungary because of falling sales.

The closure will mean the loss of up to 3,700 jobs, the largest one-off redundancies by a foreign investor in Hungary since the post-Communist rise in the economy.

The decision to close the factory follows IBM's plans to sell its hard disk drive business to Hitachi as demand continues to fall.

The Hungarian government, which was informed of the closure directly by IBM, said it would seek to create new jobs in the area.

Five years ago there were 20 hard disk drive makers and now there are four

Steve Duplessie, Enterprise Storage Group

No hard demand

IBM, based in New York in the US, said closing the Szekesfehervar plant near Budapest would lead to the loss of 2,100 IBM jobs and 1,600 contract workers.

A spokeswoman for IBM would not comment on whether the closure of the factory was part of the deal to sell the hard disk business to Hitachi. The deal is reportedly worth $2bn (�1.3bn) to IBM.

The company blamed the closure on weak international demand.

A slowdown in the global economy has meant a tightening of corporate budgets, with less orders for the technology products which use hard disk drives, such as personal computers.

"It's brutal," said analyst Steve Duplessie at Enterprise Storage Group.

"Five years ago there were 20 hard disk drive makers and now there are four. Soon there will be two."

Local help

In July, IBM announced plans to cut 1,500 jobs as part of a restructuring of its business.

It also announced a charge of up to $2.5bn (�1.7bn) to cover the cost of the changes to its business.

Meanwhile, the recently elected mayor of Szekesfehervar Tihamer Warvasovszky, said the local tax paid by IBM represented around 4% of the city's budget.

But the mayor added that there were 2,500 job vacancies in the area which would continue to provide economic stability.