SEG Sees Higher Disk Drive Demand; Faces Pdt Shortages
Article in this morning's paper ...
Seagate Technology Inc.
Dow Jones Newswires -- December 11, 1998
Seagate Sees Higher Disk Drive Demand; Faces Pdt Shortages
SINGAPORE (Dow Jones)--Demand for disk drives is picking up and Seagate Technology Inc. (SEG) said it's facing major shortages across its product lines, a senior executive said Friday.
Senior vice-president of international sales operations Joel Stead attributed the higher demand and shortages to the usual seasonal demand and the need to fully utilize corporate and government budgets before the year-end.
"We have five product lines on shortage," he said. "That's about 30%-40% of our total product lines."
Seagate is "trying to ramp up production" on PC disk drives, manufactured in China and Thailand, and on high-end drives, produced in Singapore, Stead said.
The strongest demand so far has come from Europe, followed by the U.S., he said. Despite "bright spots" in China and India, Asian demand remains sluggish, he added.
But, despite the increases and signs that the glut in the PC industry has subsided, Stead said a "dramatic uptick" in disk drives isn't likely.
Nevertheless, he said the company hopes for a 15%-20% increase in demand for the disk drive industry next year. Likely to contribute to such an increase is the need for new computer systems arising from monetary union in Europe from next year and problems associated with Y2K.
With recent management changes, product line rationalization and a greater focus on the customer, Stead said Seagate hopes to improve profitability.
Gross margins for the last quarter ended September stood at 20.7%, an improvement from 18.9% in the previous quarter, before which margins had been declining for nine months. Further improvements, which the company anticipates, depend on the execution of recently-undertaken initiatives, he added.
"We've made a lot of changes - management, rationalizing product lines," said Stead at a press conference. "I think we're more customer-focused and driven under Luczo than before."
Stephen Luczo was elected chief executive in July and named president in September.
Also positive news for 1999, Stead said, is the recent reinstatement by technology market research firm International Data Corp. of its forecast for an 11% increase in PC shipments.
The glut of PC's in the industry some 11 months ago shows no signs of resurfacing either, he said, adding the company isn't experiencing an oversupply in any product line.
The entrance of ultra low-cost PC's opens up new markets for Seagate, Stead said, adding that the company is pursuing the opportunities for that market through its investment in research and design. The company foresees strong volumes for this category of PC's, which are priced at between US$500 and US$800, he added.
-By Camille Klass; 65-421-4800; cklass@ap.org
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