Drive doldrums cost jobs
Published: 05 Jul 2004 11:05 BST
The rough times are continuing for hard-drive companies.
Following in the footsteps of rival Seagate Technology, Maxtor last Thursday announced job cuts amid worse-than-expected industry conditions. Maxtor said it would eliminate 400 to 500 positions and predicted a net loss for the second quarter, ended 26 June, of between $20m and $30m (£11m and £16m).
The company has about 13,500 employees worldwide, according to its Web site. It confirmed that its manufacturing facilities in Singapore will be affected.
"Singapore, however, continues to be the command and control centre of our hard-drive manufacturing and we will continue to manufacture our multi-platter desktop and SCSI drives here," a Maxtor spokesperson told ZDNet UK sister site CNETAsia.
The latest announcement comes on top of Maxtor's plans to transfer part of its manufacturing operations from Singapore to Suzhou in China, where a new plant is currently being constructed. The shift is expected to result in significant layoffs among its 8,000-strong Singapore workforce.
In June, Seagate also said it planned to cut its annual operating costs by about $150m and trim its work force by about 2,900 employees. Seagate said industrywide demand for drives going into "personal storage products" -- primarily desktop PCs -- was lower than expected for the quarter ended in June.
"June's typically the weakest quarter of the year for the disk-drive guys," said Mark Miller, an analyst at investment research firm Hoefer & Arnett.
Miller, who holds shares in Maxtor, also said that the industry is suffering from an "inventory bubble" that is limiting demand for its products. But Maxtor has had its own particular problems, he suggested. "We feel they have lost some (market) share, perhaps at Dell," he said.
A Maxtor representative declined to respond to Miller's comment, saying the company was in its "quiet" period in advance of its earnings report on 21 July.
Maxtor said shipments in its second quarter were about 10 percent below initial expectations. The company also cited greater-than-expected price declines as a factor. "We are extremely disappointed in our second-quarter performance," Maxtor chief executive Paul Tufano said in a statement.
In addition to difficult market conditions, one issue roiling the disk-drive industry is a set of lawsuits against start-up company Cornice. Both Seagate and Western Digital have sued the maker of tiny drives, alleging patent infringement.
Seagate last Friday said that it has also filed a patent infringement complaint against Cornice with the US International Trade Commission. Seagate said it is seeking "an order from the US International Trade Commission to exclude Cornice disc drives and any systems or products using or containing Cornice disc drives from entry into the United States." All Cornice hard drives are made in China.
The gloomy climate is a shift from optimism about the industry voiced last year. One analyst has blamed the trouble this year on a familiar problem: overproduction from drive makers.
Still, the long-term outlook looks rather sunny for disk drives, especially those for newer digital consumer electronics devices such as music players. John Monroe, an analyst with research firm Gartner, has predicted that every teenager in the world is going to want an MP3 player with a hard-drive.
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