Seagate Trims 1,100 Jobs
Storage-maker Seagate has announced a 2.5 percent work force reduction, which means pink slips and job cuts for 1,100 employees.
This news comes on the heels of 800 job cuts and the resignation of CEO Bill Watkins back in January of this year--though the New York Times reported up to about 3,000 jobs eliminated over the first quarter of 2009. Seagate apparently upped the number only a few weeks after announcing the 800 job losses.
There is no information as to which divisions, departments or the type of jobs eliminated.
Seagate's cost-cutting moves are not good short-term news to Seagate investors and stockholders due to the elimination of dividends. At the time of writing this post, Seagate's stock price is down 6.68 percent at $6.84.
From a Reuters article on Seagate:
About one month ago, Seagate reported disappointing quarterly gross margins and eliminated its dividend, reflecting weak demand from corporate customers and stronger sales of lower-priced products. The elimination of the quarterly dividend is expected to trim costs by about $60 million annually, the company said.
Seagate has been in aquisition mode since 2005. Over the last four years, Seagate has acquired the following 4 companies:
- Mirra Inc
- Maxtor Corporation
From the Seagate announcement today:
This reduction is required to support a targeted run rate of product development and marketing and administrative costs of less than $300 million per quarter and to position the company to be cash flow and earnings positive within its fiscal year 2010.
The restructuring plan, which the company expects to be largely completed by the end of July 2009, is expected to result in total pretax restructuring charges of approximately $72 million. These charges will primarily be incurred in the June 2009 quarter and consist mainly of cash-based employee termination costs which are expected to be substantially paid in the September 2009 quarter. The annual savings generated from this restructuring action is expected to be approximately $125 million.
Since the beginning of fiscal year 2009, and including today's announcement, the company has reduced its global headcount through attrition and restructuring, resulting in a reduction in the company's labor costs in excess of 25 percent. In addition, Seagate previously announced the realignment of its organizational structure to increase efficiency, as well as the closures of two recording media facilities and its Pittsburgh research facility, companywide salary reductions announced in January 2009, and other cost reduction initiatives. Seagate continues to assess options to further reduce manufacturing operating costs.