Seagate Reports Record Losses, Forecasts Continued Sales Drop

January 21, 2009

The world’s largest hard-drive maker reports for its fiscal second quarter today a net loss of $496 million, on revenues of $2.27 billion, compared to a gain of $403 million and revenues of $3.42 billion last year.

This is Seagate’s first quarterly loss since 2004. Looking ahead, Seagate expects fiscal third-quarter revenue of $1.6 billion to $2 billion.

Competitive price pressure will continue through 2009

Last quarter, gross margin fell to 14.2% from 26% due to competitive price pressures, both for its retail and OEM businesses. The company shipped 37 million hard-disk drives but is loosing market share to rival Western Digital in the faster-growing notebook segment.

Last week, Seagate appointed Chairman Stephen Luczo the top post, replacing CEO Bill Watkins and COO Dave Wickersham. Luczo was Seagate’s CEO from 1998 to 2004 and led the company move to go private and public again.

The Scotts Valley, Calif-company also said it would cut about 2,950 jobs, or about 6% of its work force, and salaries of its top managers by as much as 25%.

Seagate’s debt is now junk

Seagate’s current debt load is at a whopping $2.4 billion at the end of the last quarter. Long-term debt maturities over the next 18 months consist primarily of $300 million in October of 2009 and $135 million in April of 2010.

The company’s credit ratings is now in junk territory downgraded by all three major rating agencies making it much painful to borrow more capital.

Leave a Comment » | hardware, news | Tagged: , , , , | Permalink
Posted by TechPulse 360

Is Seagate Getting Ready To Go Private Again?

January 12, 2009

It looks like it as the hard disk-drive maker appointed chairman Stephen Luczo as CEO, a post the Seagate veteran of 15-years held from 1998 to 2004.

It makes sense for Seagate to go private

Most noteworthy is that Luczo led Seagate’s privatisation in 2000 and then its public offering in 2002.

The Scotts Valley, Calif.-company market capitalisation is only worth about $2.3 billion despite having over a $1 billion in the bank, questioning the rationale of being a public company in these eratic times.

In addition, Seagate said earlier today it planned to reduce its U.S. workforce by about 10 per cent. About 8,000 of its 54,000 employees are located in the U.S.

Leave a Comment » | ces, hardware | Tagged: , | Permalink
Posted by TechPulse 360

Western Digital Lowers Outlook; Cuts Jobs, Factories

December 17, 2008

The hard disk drive makers are hitting the brakes.

Today’s warning from Western Digital sure feels like a copy-cat announcement from Seagate last week: job cuts, reduced revenue outlook, holiday shutdown.

Revenues missed by $300 million

The Lake Forrest, Calif. company revised its revenue outlook for its second fiscal quarter – ending December 26 – to be in the range of $1.7 billion to $1.8 billion, versus its October estimate of $2.025 billion to $2.150 billion. A $300 million shortfall.

In addition, Western Digital will axe 2,500 employees or five percent of its total workforce, cut capital spending by 34 percent – to $500 million – in 2009, shut down plants and temporarily halt the majority of its manufacturing operations for 2 weeks, starting next week.

The second largest hard drive maker expects the demand to remain weak well into the middle of the 2009; in line with Seagate CEO Bill Watkins’ own estimates who sees however demand picking up next September.

Early January, Seagate plans to announce its own set of cuts.

Leave a Comment » | hardware, news | Tagged: , , | Permalink
Posted by TechPulse 360

Hybrid Disk Drives Deliver Poor Performance, Samsung Finally Admits

December 12, 2008
Hybrid disk drives sucked admits Samsung Semiconductor Storage director Hubbert Smith

Hybrid disk drives sucked admits Samsung Semiconductor Storage director Hubbert Smith

A year and a half after being the first to launch hybrid disk drives, Samsung finally comes out with the truth: they sucked!

The technology that combines a conventional hard disk drive and on-board Flash non-volatile memory just didn’t deliver the over-hyped performance it promised.

But the main culprit was not necessarily the hard disk drive makers like Samsung or Seagate but Microsoft that did not deliver in its promise to support the technology in its Windows operating systems.

“The data that arrived on the hybrid drive was randomly stored on the Flash or the disk drive. It was a mess,” admitted Hubbert Smith, the director of enterprise storage marketing for Samsung Semiconductor, speaking at yesterday’s IDEMA storage symposium.

Next generation hybrid drives should significantly perform better

Just last month, at Microsoft’s WinHEC hardware conference, Seagate unveiled its next generation of hybrid drives with on-board controllers that intelligently and automatically cache the data on the Flash memory, mentioned Smith. These new drives will no more require any special drivers or software and will work with Microsoft Windows but also Mac OS and Linux computers.

Smith did not comment on the availability of similar hybrid drives from Samsung. But in any case, be prepare to always pay the price of the first adopting a new technology and eventually get “screwed”. There’s a good reason why it is called the “bleeding” edge!

2 Comments | hardware, news | Tagged: , , , , , | Permalink
Posted by TechPulse 360

Seagate Invests Nearly $100 Million A Year In Flash Technologies

December 11, 2008

Early next year, Seagate is preparing a major push in Flash-based drives – also known as SSDs – and home entertainment devices.

The Scotts Valley, Calif., company said it is investing between $80 to $90 million a year in Flash technologies that will first be used in enterprise storage products.

“The enterprise is a good place to put SSDs where they are able to take advantage of the better performance. But that’s going to be only 5% to 10% of our enterprise market,” confided Seagate CEO Bill Watkins during a meeting with financial analysts this week.

Flash drives will be slow to take off

However, the world’s largest drive maker does not see Flash drives to make any real inroads in the more “conventional” notebook and desktop businesses, where PC makers want drive with capacities from 160GB to 300 GB and growing.

“Today Flash drives can not match the $40 or 50$ that we ask for a 300GB drive,” added Watkins who criticized Samsung’s upcoming 64G-byte three-bit MLC SSD in the first half of 2009 for being less reliable and less performance than previous generations of SSDs.

Although Seagate sees a significant volume opportunity in the netbook category, which more often than not are shipping with an embedded hard disk drive and not a Flash drive, extreme low prices are the major factor for staying away from this sector.

Whereas hybrid drives, that combine a traditional magnetic drive with some Flash memory on board that increase significantly a machine’s boot up time, could well take off before Flash-only drives if only the technology was better supported by operating systems vendors like Microsoft or Apple.

Leave a Comment » | hardware, news | Tagged: , , , , , , , | Permalink
Posted by TechPulse 360

Seagate Cuts Revenue Outlook; Plans Large Restructuring In January After Mandatory Holiday Shutdown

December 11, 2008

Seagate warned yesterday that it now expects revenues for the current quarter to be in the range of $2.3 to $2.6 billion, which is about $500 million off previous projections, communicated just a little over a month ago.

The world’s largest disk drive maker also confirmed our earlier report that it is in a midst of a major restructuring analysis to slash production capacity and its workforce – rumored to be up to 20% – as well as impose a company-wide mandatory holiday shutdown.

“We can make money at $3 billion a quarter. We can even make money at $2 billion. But we can not make money If I think it’s $3 billion and it ends up only $2 billion,” admits Watkins.

In a meeting with financial analysts in San Francisco, Seagate CEO Bill Watkins said that sales were “decent” up until the second week of November when demand suddenly “pullback”; affecting sales in retail, enterprises and PC manufacturers or OEMs.

A deteriorating situation that quickly resulted in a price war among hard drive makers including Western Digital, Samsung, Fujitsu, Hitachi and Toshiba.

“We didn’t want to try to make this quarter. We decided we need to pull back, get pricing under control and focus on the long term opportunity,” adds Watkins.

Other comments from Seagate’s CEO on his views of the troubled disk drive market:

We made deals that were not making financial sense, that were screwing up the next quarter.

We have to be disciplined and walk away from bad deals.

Asia is the strongest market by far, the U.S. the weakest and Europe is in the middle but falling rapidly too.

Russia, Ukraine, Brazil and Korea (melt down) were the other geographical areas that were hit hard mainly because of the credit crunch

Leave a Comment » | hardware, news | Tagged: , , , , , , | Permalink
Posted by TechPulse 360

Seagate Plans To Restructure In January; Can It Go Private Again?

December 9, 2008
Seagate CEO, Bill Watkins, is navigating in troubled waters

Seagate CEO, Bill Watkins, is navigating in troubled waters

Amid the hard disk drive glut, Seagate plans to announce a major restructuring early next year.

“We have to readjust our production capacity to meet the lower demand,” said Bill Watkins, Seagate CEO at a media dinner last night.

The hard disk drive market is finally consolidating

Seagate is obviously not alone in the hard drive industry having to readjust drastically its expectations. Yesterday, Fujitsu’s CFO revealed that the Japanese company money-losing hard drive business is now up for sale; with Western Digital and Lenovo potential buyers.

Watkins also pointed to the “absurd” valuation of companies in the storage sector that will undeniably spur mergers and acquisitions or even “take-private” deals.

Seagate market value is around $2.5 billion despite having $1.1 billion in cash and short term investments!

“For the first time since Seagate went public, I bought some shares!,” admitted Watkins who said he never sold any of his Seagate shares either.

Private equity firm Silver Lake Partners took Seagate private 8-years ago before letting it go public 2-years later. “The market is not ready for a debt-based buyout. But we’re looking at other alternatives,” speculated Watkins.

It would be only the second time in 10-years that Seagate will be a private company. Déjà vu anyone?

1 Comment | hardware, news | Tagged: , , , , , | Permalink
Posted by TechPulse 360

More Bad News For PC Suppliers; Quarterly Forecast For Disk Drives Cut Sharply With Downbeat Outlook For 2009

December 3, 2008

The disk drive market could shrink in the fourth quarter by as much as 10 percent due to the weak sales of personal computers, said market monitor iSuppli.

Next years disk drive market could rise only 4.3%

Next year's disk drive market could rise only 4.3%

The research firm said it lowered its outlook for the market amid what it sees as rapidly changing demand for electronic components. Disk-drive shipments could be flat with shipments of 158 million units in the third quarter.

Or they could tumble to 149 million units, off 10 percent. The firm had predicted in September that drive sales could climb 5 percent.

ISuppli also cut its outlook for next year saying the market uncertainty is even greater for the period. Shipments could grow between 6.8 percent and 4.3 percent, a significant weakening from the 14 or so percent growth expected for all of 2008.

1 Comment | economy, hardware, news | Tagged: , , , , , , , | Permalink
Posted by Mark Boslet

Seagate: Build-It Early And Hope Consumers Will Come

October 29, 2008
At the Seagate enterprise and security event

At the Seagate enterprise and security event

Not that this come as a surprise these days, but uncertainty about consumer spending this holiday season was the hot topic “du jour” at last night “enterprise and security” event hosted by Seagate.

At the meeting, attended by the San Francisco press and analysts corps as well as executives from the Scotts Valley, Calif.-based company, I was surprised to hear that October was actually a very good month for the hard-disk drive maker.

Inspite of having any idea if consumers will actually rush to retail stores (online or not) to purchase electronic goods, PC makers and consumer electronics companies are fiercely building products in preparation for the holiday season. “The goal is to have them on retail shelves as soon as possible and hope consumers will come”, said one of the Seagate exec.

Credit is scarce, but hard-disk drives are really cheap these days!

At the meeting there were also fears that credit card companies start squeezing consumers, cutting back credit limits and increasing interest rates, as the New York Times reports today.

But disk drives are cheap and may even come out a lot cheaper on Black Friday – the biggest retail day of the year – thanks to “price leaders” like Simpletech or Iomega. “Sometimes prices fluctuate week over week. That’s so different from last year, when we had 6 months of price stability dues to a lack of products to sell”, added another Seagate exec.

And in these times, cheap is perhaps the only thing consumers may be willing to spend!

The first indicator of how this holiday season will turn out will be on the first Tuesday post-Thanksgiving, when retailers post their Thanksgiving weekend sales figures… It will set the trend for Christmas to come. But if its really bad, the U.S. Government might step in again to un-squeeze the credit crunch to save this holiday season.

But the fall out will eventually come… and that’s in January. I wonder what will happen at CES, the world’s largest consumer electronics show happening in Las Vegas the second week of January. No more parties maybe?!

Leave a Comment » | hardware, news | Tagged: , , , | Permalink
Posted by TechPulse 360

Seagate CEO: Japanese Hard-Disk Drive Makers To Consolidate; No Price Wars

October 22, 2008
Bill Watkins, CEO, Seagate

Bill Watkins, CEO, Seagate

During a questions and answers session with Wall Street analysts, Seagate CEO, Bill Watkins said he anticipates a “Japanese consolidation” of hard-disk drive makers Hitachi, Fujitsu and Toshiba.

As opposed to Western Digital buying Fujitsu’s hard-disk drive business as Nikkei newspaper reported earlier this month.

Watkins also just doesn’t understand why Samsung is still in the disk-drive business “having spent the money they’re doing” and not making money!

“If you haven’t made money last year, you will certainly not make money next year”, said Watkins.

Finally, Seagate’s CEO doesn’t believe in an upcoming price war to drive competitors out of business. “We’re going to grow shares responsibly”, he adds.

Leave a Comment » | hardware, news | Tagged: , , , , , | Permalink
Posted by TechPulse 360

« Previous Entries
Next Entries »
Follow

Get every new post delivered to your Inbox.

Join 32 other followers