Seagate, Quantum Suffer on Disk Drive Glut
By Kourosh Karimkhany
PALO ALTO, Calif. (Reuters) - Two of the biggest computer disk drive companies -- Seagate Technology and Quantum -- are sending out distress signals, confirming that the industry faces a serious glut.
Seagate, the world's biggest disk drive maker, said it will close a drive manufacturing plant in Clonmel, Ireland, and fire 1,400 workers there. The company also will take an unspecified restructuring charge.
Quantum, the second-biggest disk maker, warned investors that its third-quarter earnings will be less than half as much as Wall Street forecasts.
Both companies blamed industry overcapacity and falling prices. They join Western Digital Corp., the third-biggest disk maker, which last week said its earnings would be far less than expected because of falling prices.
What you're dealing with is an industry that has too much capacity," said James Porter, president of market researcher Disk/Trend Inc. The U.S. companies are faced with Asian competitors with sharp pencils."
Fujitsu Ltd., Samsung Group. and Hyundai Group each have plans to aggressively win business, Porter said. All the drive makers had built factories in anticipation of those plans, but now face a glut that is causing prices to collapse.
Disk drives are the main storage devices of personal computers, and store programs, documents and graphics.
Historically, the disk drive industry goes through a three- year cycle of boom and bust. The top three disk drive makers had enjoyed robust growth for several quarters until September, when some of them began to falter.
The last time the industry had an imbalance of supply and demand, it corrected itself in one quarter," said Michael Brown, chief executive of Quantum. I think this situation is more severe than that time."
Seagate, based in Scotts Valley, Calif., said a month ago that it was reviewing" its worldwide operations to cut costs.
In Ireland, Seagate will close its Clonmel disk manufacturing plant and eliminate 1,100 permanent and 300 temporary jobs. Separately, Seagate will postpone the expansion of a wafer plant in Springtown, Northern Ireland, by about six months.
Quantum, based in Milpitas, Calif., said it expected to report fiscal third-quarter earnings between 25 cents to 35 cents a share. Wall Street had expected the company to earn 74 cents a share, according to an analyst survey by Zacks Investment Research. |
