Komag sees weak Q1 results as problems continue
SAN JOSE, Calif., April 1 (Reuters) - Komag Inc. (Nasdaq:KMAG - news), which makes disks used to store data on computer disk drives, said Thursday its first quarter results would fall short of previous forecasts as sales continued to fall.
The company said in a statement first quarter sales will be about 3 percent to 5 percent below fourth quarter levels of $92.7 million resulting in a loss which it said would be larger than the $18.8 million, or 35 cents a share, it lost in the fourth quarter.
Analysts had expected the company to report a loss of 16 cents a share for the latest quarter, according to First Call. In the year-ago quarter Komag reported a loss of $58.2 million, or $1.10 a share, on sales of $76 million.
The company had said in January it expected first quarter results would be better than its fourth quarter as it began to see the benefits from a rebound in the disk drive industry.
Komag said Thursday the weak results came despite sequentially lower operating expenses as sales continued to fall and production costs rose. The company said unit sales volume was essentially flat with the fourth quarter when it sold shipments of 10 million disks.
The company said that during the first quarter it reduced unit production volume to between 11 percent and 13 percent below fourth quarter levels as it attempted to minimize inventory build. As a result of that action fixed production costs per unit increased compared to the fourth quarter.
Komag's difficulties mirror that of the disk drive industry which has been troubled for almost two years due to oversupply and the effects of the Asian economic crisis.
The company said it is continuing to discuss its ongoing default on certain terms of its bank facilities. It said that since the situation has yet to be resolved its annual report, which will be filed in the next week, will include an audit opinion which will include a going concern paragraph that highlights the ongoing default.
The company said negotiations on the loan amendments are progressing.
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