Seagate Technology, the top U.S. maker of computer hard-disk drives, said on Wednesday that it will cut about 7 percent of its work force by the end of the year in a bid to boost profitability.
Seagate, which along with its rivals has been buffeted this year by an unpredictable market, also said that its current quarter has been marked by normal demand patterns for its products. It did not issue a specific financial forecast for the quarter.
Seagate, which also did not issue a financial forecast when it last reported quarterly results in April, said that its board had approved the job-cut plan to cut the company's annual operating costs by about $150 million and that Seagate will take a charge of about $50 million in the current period, its fiscal fourth quarter.
Seagate, which competes against Maxtor Corp., Western Digital Corp., Hitachi Ltd. Toshiba Ltd. and others, also plans a series of product announcements in the next two weeks that will allow Seagate to compete for an additional $4 billion in revenue in the overall disk drive market, executives said on a conference call to discuss its mid-quarter update.
Seagate's products now span about 75 percent of the disk drive market. The new products will allow it to sell to more than 90 percent of the disk drive market, executives said, from consumer electronics to large businesses.
Job cuts not unexpected
The job cuts were not entirely unexpected.
Laura Conigliaro, an analyst at Goldman Sachs, wrote in a brief note to clients that the job cuts amount to about 3,000 people. She had earlier expected job cuts of about 2,000.
A Seagate spokesman declined to comment on the precise number of jobs cut because the cuts had not been completed. Seagate now has about 42,000 workers; a 7 percent reduction would amount to 2,940 jobs,
Some of the workers who will be laid off have accepted voluntary severance packages and others will be given severance packages in according with Seagate policy, the spokesman said.
Seagate forecast that the total available market in the fourth quarter for disk drives used in servers and in notebook PCs is 5.1 million and 14.5 million units, respectively, consistent with its earlier view.
But the market for disks used in desktop PCs in the fourth quarter will be 45 million to 46 million units, lower than its forecast of 48 million units disclosed on April 20, when it reported third-quarter results.
In the mobile disk-drive market, Seagate said it still expects to be hurt by the supply imbalance it experienced last quarter. The company continues to work down excess production of hard drives used in laptops. Pricing in the mobile market has also been more aggressive than Seagate's previous expectations, the company said.
Seagate's fourth quarter ends July 2.
Analysts now forecast the company to post, on average, a profit of 1 cent per share, within a range of a loss of 5 cents to a profit of 5 cents, on revenue of $1.38 billion, according to Reuters Estimates.
Shares of Seagate fell 47 cents, or 3.7 percent, to close at $12.21 on the New York Stock Exchange. In late trade, the shares climbed to $12.41. Year to date, Seagate stock is down about 35 percent, compared with a 1.2 percent decline in the Goldman Sachs Hardware Index.