Seagate to Announce 10% Workforce Reduction

Seagate, the world's largest hard-disk drive manufacturer, is expected to announce a 10 percent workforce reduction, as part of the company's new restructuring program, according to a Seagate executive. The drastic measure comes as a response to the weak market demand, which has made the storage maker see lower than expected revenues in the December sales report.

According to the latest details, the company's December sales were considerably lower than what Seagate was expecting. Bill Watkins, the company's CEO, told Tech Trader Daily that the last month of 2008 was “just terrible” in terms of demand for hard-disk drives. One of the main reasons for the lower demand is the sharp drop in distribution channel inventories, Mr. Watkins believes.

 

As a consequence of the low sales results, the company is expected to announce a reduction of capacity and a significant layoff plan, which will include approximately 5000 job cuts, or 10 percent of its U.S. workforce, as revealed by Brian Dexheimer, president of the consumer division, in an interview with Reuters at CES, last week.

 

The announcement follows that made on December 10, last year, when the company cut its Q4 revenue forecast to a range of $2.3 billion to $2.6 billion, down from the previously estimated $2.85 to $3.05 billion. Apparently, the market demand was even lower than initially predicted, which consequently means that Seagate will be lowering its Q4 revenue forecast even more.

 

Seagate isn't the only hard-disk drive vendor forced to lower its revenue forecast because of low market demand. Its main rival, Western Digital, also announced in December 2008 plans to cut 5 percent of its workforce, resulting in approximately 2500 layoffs. The announcement is part of the company's plan to trim costs in these difficult market situations.