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By | Chris Mellor 13th May 2009 15:26

Seagate slashes more jobs

1,100 sacrifices for $125m annual savings

Seagate is cutting a further 1,100 jobs with a view to reaching break-even point, aiming to save $125m a year.

Seagate is the world's largest supplier of hard disk drives and the cuts represent 2.5 percent of its global headcount. They will get Seagate's cost down to less than $300m a quarter and, hopefully, make the firm profitable within its fiscal 2010 year.

The cost - largely in severance payments - will be about $72m, and the redundancies should be complete by the end of next month. Seagate has reduced its global labour costs by 25 percent since the beginning of 2009, with this latest set of cuts included.

It has closed two recording media facilities and its Pittsburgh research facility, as well as imposing company-wide salary reductions. Other facilities may close as the company is saying it "continues to assess options to further reduce manufacturing operating costs".

Seagate reported a loss for its third 2009 quarter, following a loss in its second quarter, and cancelled dividend payments.

All this first came to a head back in January when Seagate axed CEO BIll Watkins and chairman Stephen Luczo took over the CEO's job. Since then he has instituted a review of, and reduction of, Seagate's cost structure as it struggles with its reduced sales in the recession being insufficient to cover its manufacturing and other costs.

This was not helped by Seagate becoming less successful in the 2.5-inch, small form factor drive market, where competitor Western Digital made product sales headway with area density leadership. Seagate has since regained areal density parity in that market. Western Digital also appeared relatively more successful in the externally-attached hard drive market. Again Seagate has responded with a boosted FreeAgent line.

Luczo has also had to cope with Barracuda product quality problems.

The latest headcount reductions means that Seagate will be at its most efficient with an estimated 40 million hard drives being produced by its reduced number of employees, according to Stifel Nicolas analyst Aaron Rakers. There is no indication of where, in Seagate's operations, the headcount reductions will be made.

Coincidentally, competitor Western Digital is re-hiring people in its Thailand plants. ®

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