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Seagate<SEG.N>sees Q1 loss, launches review
By David Brunnstrom
BANGKOK, July 16 (Reuters) - The world's top maker of computer disk-drives, Seagate Technologies, said on Friday it expected to make a loss in the current quarter and was reviewing global operations.
Chief financial officer Charles Pope said disk-drive prices had fallen below manufacturing costs and that it would be very difficult to be profitable in the first quarter to September.
"Given the pricing environment that we exited the June quarter at, it would be very difficult to be profitable during the September quarter," he told Asia-based analysts and journalists in a conference call from the United States.
"I won't be specific on how much we would expect to lose. I don't think it's a huge amount, but it's a disappointment given the progress that we've made that we can't even anticipate being profitable in the September quarter," Pope said.
He said Seagate could be close to breakeven in the December quarter. "It would be difficult, but I think that that is attainable," Pope said. He added: "We would anticipate being profitable for the entire fiscal year ending in June."
Pope forecast an "even more intensely competitive" environment, which would put more pressure on Seagate, and said its review of worldwide operations aimed to improve efficiency.
But he said Seagate was encouraged to remain committed to Asia because of the expertise available to it in the region.
"There are advantages and disadvantages of each particular area. At this point in time we are appropriately in a position of reviewing everything," he said.
Pope said the future would see a change in the mix of employees away from direct labour to those with more technical and engineering skills. Asked if Asia possessed the requisite skills to allow a maintenance of employment levels, he replied:
"I think that there are very strong skill sets there so that it does not indicate that there is a move away from Asia. We are very happy with the skill sets in most of the Asian region."
Asked about Thailand, where it employs 35,000 of its 84,000
global workforce, he replied:
"We have indicated that as a company we don't intend to increase employment. We need to take advantage of productivity gains to grow the business and we are still basically in that position.
"We have no plans to decrease employment anywhere at this point in time, but we specifically have plans to avoid increasing employment anywhere.... I don't see a situation when we will just resume hiring again."
"There's still going to be a lot of direct labour, but we have to focus on where the technical resources are in greatest abundance," he added.
Asked if Seagate would move operations from Singapore, he said: "We have always had a long-standing and good relationship in Singapore and I don't see that relationship ending."
Pope said Seagate had already narrowed its Asian supplier base significantly and was unlikely to go much further.
He said Seagate's investment policy in Asia was to keep plants "technologically capable," not to expand capacity.
On Thursday, California-based Seagate reported fourth-quarter earnings below diminished expectations.
Profit before gains was $69 million, or 30 cents a share, versus year-ago results of $22 million, or nine cents a share. Analysts had expected earnings of 34 cents a share. |
