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Quantum Restructures Desktop Hard Drive Business
to Address Market Shift to Low-Cost PCs
MILPITAS, Calif.--(BUSINESS WIRE)--Aug. 19, 1999--Quantum Corporation's Hard Disk Drive Group (NYSE: HDD -
news) today announced a restructuring of its desktop hard disk drive business that will more closely align product development
and the business's operating model with the requirements of the rapidly growing sub-$700 PC market.
As a result of the restructuring, the Hard Disk Drive Group (HDDG) will reduce its workforce by approximately 750-800
employees in HDDG over the next 12 months and record a special charge of approximately $50 million in the current quarter,
ended September 26, 1999. Upon full implementation of the restructuring, HDDG currently expects to realize a $100 million
cost savings per year, fully realized beginning in fiscal year 2001.
''The goal of this restructuring is to quickly adapt our business to the changing needs of our PC customers,'' said John Gannon,
president of Quantum's Hard Disk Drive Group. ''The growth of the low-cost PC market has become a challenge for virtually
every company in the PC supply chain, and Quantum is no exception. However, we view this high-growth segment of the disk
drive market as a huge opportunity, and we are confident that the changes we're implementing now are going to position us
strongly for the future in this important market segment.''
As part of the restructuring, HDDG will increase its focus on the technologies required to bring the highest-quality, lowest-cost
desktop products to market, while continuing to build a position in the high-performance, 7,200 RPM segment. As a result,
certain future, unannounced product development programs will be consolidated. These changes, combined with improved
efficiencies within the business, will result in an immediate reduction in force of approximately 115 employees within the
desktop drive business.
HDDG's recently announced Fireball lct is an example of the company's increased focus on high quality and low cost. This
product, which is Quantum's first in a new generation of drives targeted at the sub-$700 PC market, is designed to offer high
reliability and low cost across a broad range of desktop capacity points. All of the top PC OEMs are currently qualifying this
drive, with mass production and first customer shipments scheduled to begin in September.
In addition to focusing on lower-cost technologies, HDDG will streamline its global logistics model in order to create a faster
and more flexible fulfillment system for customers worldwide. This will result in a reduction in force of approximately 650-700
employees at Quantum's drive configuration centers and warehouses in Milpitas, Calif. and Dundalk, County Wicklow, Ireland.
These reductions, combined with the 115 previously mentioned, will result in a reduction in force of approximately 750-800
employees in total over the next 12 months.
''More and more of our customers are shifting from custom- to standard-configuration drives,'' said Gannon. ''As a result, we
are shipping a higher percentage of drives directly from our automated manufacturing lines at MKE (Matsushita-Kotobuki
Electronics, Ltd.) to customer sites worldwide. Both standard-configuration and direct shipment are benefiting customers in the
form of lower costs and higher quality, and allowing HDDG to reduce its investment in logistics. This change in our logistics
model directly supports two of HDDG's three key areas of competitive focus in our hard disk drive business: asset
management and quality. These three disciplines, which also include time-to-market, are becoming increasingly important as we
strengthen our competitive capabilities in today's difficult market environment.''
According to Quantum chairman and CEO Michael Brown, difficult conditions in the desktop disk drive business today are
being driven by two distinct phenomena occurring simultaneously.
''Not only are we seeing strong growth of the sub-$700 PC market and the pricing pressure created by that shift, the industry
is also under pressure from competitors who are aggressively attempting to gain market share based on price,'' said Brown.
''The actions we have announced today are specifically intended to adapt our business to the market changes brought on by
the rapid shift to low-cost PCs, and are not expected to offset the near-term impact of the competitive price pressures within
the desktop drive industry. On that front, Quantum will continue to speak out strongly against the destructive pricing practices
that are plaguing our industry.''
Last week, the Wall Street Journal quoted Brown as saying that, moving forward, Quantum will not compete with other
suppliers to increase market share based on price alone.
''Our commitment to the desktop drive business is unwavering,'' said Gannon. ''This market represents a high-volume,
high-growth opportunity where we are the clear leader, and our execution in it has never been better. We have a leading
position at all of the top 10 PC OEMs, and we are the leading supplier of consumer electronics storage devices at a time when
that market is positioned for rapid growth. The restructuring announced today will help position our desktop business for
continued, long-term success.''
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