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NEW YORK -(Dow Jones)- Disk-drive parts makers StorMedia Inc. and
Read-Rite Corp. have been left in the lurch following a bankruptcy
filing by a delinquent customer, Micropolis.
Micropolis filed under Chapter 11 of the U.S. Bankruptcy Code in a
federal courthouse in Los Angeles on Nov. 12, a court contact said
Thursday. Price Waterhouse has been hired to carry out the liquidation
of the hard-disk-drive maker, bought last year by Singapore Technologies Group.
Details of the court filing weren't immediately available. Neither
Micropolis nor Singapore Technologies could be reached for comment.
Micropolis's liquidation comes at a time in the disk-drive industry
when consolidation has shrunk the field of competitors and placed more
pressure on companies to remain profitable.
"The drive industry has consolidated over the last 10 years," said
Patrick Tenney, analyst with BancAmerica Robertson Stephens. "There was a time when there were dozens of companies. Now the top four have most of the industry business."
Seagate Technology Inc. (SEG) is the largest maker of computer disk
drives. Other major players in the industry are Quantum Corp. (QNTM),
Western Digital Corp. (WDC) and International Business Machines Corp.
(IBM).
Milpitas, Calif.-based Read-Rite (RDRT) said Wednesday that it will
take a charge of up to $15 million for the fourth quarter ended Sept. 30 to write off the delinquent Micropolis account. The company will restate its fourth-quarter earnings to reflect the charge.
Read-Rite, which has been suffering amid reduced demand and pricing
pressure on inductive thin-film recording heads, last month reported
fourth-quarter net income of $30.5 million, or 61 cents a diluted share, after a charge. Before items, the company's profit came to 65 cents a share, two cents short of analyst estimate.
Read-Rite said it will take actions to recover payment from
Micropolis. For the current quarter ending Dec. 31, Read-Rite said
Micropolis would've accounted for less than 1.5% of net sales.
StorMedia's (STMD) stock has been hammered in the past two weeks amid rumors of Micropolis's liquidation. In a report last week, StorMedia said it had entered into a three-year agreement with Micropolis. The third-quarter 10Q filing said sales to Micropolis accounted for 19% of StorMedia's thin-film business for the nine months ended Sept. 26.
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