Maxtor Reports Increased Revenues

Although Maxtor Corp. reported both increased sales and revenue compared with a year ago, company executives said channel resellers apparently held onto inventory to negotiate better deals.

During a conference call Wednesday, Maxtor executives stopped short of accusing its resellers of any impropriety and did not name specific firms. But company executives said their tests had determined that channel resellers had used pricing protection mechanisms to help their own margins.

Maxtor reported net income of $38.8 million on revenue of $1.17 billion, a 12 percent increase in revenue from a year ago, when Maxtor reported a net income of $3.6 million. For the fiscal year, Maxtor reported net income of $102.3 million on revenue of $4.09 billion, versus a net income of $334.1 million on revenue of $3.78 billion during fiscal 2002.

"Were extremely pleased with our results, which reflect actions taken in the past several years to return to profitability," sad Paul Tufano, president and CEO of Maxtor, in Milpitas, Calif.

Maxtor, primarily a supplier of disk drives to desktop PC OEMs, shipped 15.8 million hard disk drives during the quarter, of which 14.9 million went into PCs. A little over 1.6 million disk drives were shipped to consumer-electronics customers, Maxtor said, and about 854,000 disk drives were sold to enterprise customers. Average selling prices (ASPs) climbed to $74; during the third quarter, ASPs hovered at $71, according to Robert Edwards, the companys chief financial officer.

Sales of 40-GB-per-platter products represented 60 percent of fourth-quarter sales, and the company is carefully negotiating the shift to 80-GB-per-platter products, Edwards said. Maxtor used 2003 to build its base in enterprise drives, he added.

But on Dec. 30, Edwards disclosed, longtime manufacturing partner Matsushita-Kotobuki Electronics (MKE) filed a patent suit against both Maxtor and Quantum Corp., which sold off its disk business to Maxtor. Although Tufano said Maxtors attorneys believe the suit is without merit, Maxtor will shift its next-generation Atlas server drives out of MKEs manufacturing facility and into its own plant in Singapore. MKE and Maxtor have a healthy working relationship, and the transition should be made gracefully, without any effect on supply, Tufano said.

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