This was posted on the Quantum thread. This is not new information, Quantum
stated in their last CC/earnings report that they would take this charge
$35 million. The additional $5 mil for the MKE is new but not especially
noteworthy.
Quantum Today Announced Changes to Improve Operation of its High-End HDD
Business
MILPITAS, Calif.--(BUSINESS WIRE)--Nov. 21, 1997--Quantum Corporation
today announced changes to its hard disk drive business designed to improve the
operation and lower the break-even point of the high-end portion of that business.
The company confirmed that the non-recurring charge associated with those changes
would be a maximum of $35 million after tax. Quantum also announced that MKQC,
its heads operation jointly owned with MKE, is streamlining operations to help improve
operating efficiency and lower the break-even point. The charge associated with the
changes within MKQC is an additional $5 million after tax.
''We are committed to growing our high-end hard disk drive business and to making it
an ongoing profitable business for Quantum,'' said Michael Brown, Quantum's CEO.
''The competitive pressures and industry structure of this market segment are changing
as a result of increased competition. In light of that, we are modifying our business and
operating models to lower our break-even point and to enable us to generate strong
returns over a broader range of market conditions.
''Key decisions we have made include: rationalizing and simplifying the product
roadmap for our future high-end products; combining resources to jointly develop
platforms which can ultimately be modified for desktop or high-end applications,
leveraging the lower costs of our desktop platforms; and developing a common
architecture for all of our high-end products, whether they are developed in Milpitas,
California or Shrewsbury, Massachusetts,'' continued Brown. ''Some reduction in
employment was made possible by our decision to employ a common architecture.
Finally, we realigned engineering resources to ensure that we can fully staff committed
development programs and eliminate the need for a previously planned expansion in
hard drive business headcount. In summary, we are making these changes to improve
our operating efficiency, the cost basis of the business, and our ability to execute.
''To support and enable these changes, especially the ongoing leverage of resources
and platforms across the desktop and high-end businesses, we have combined our
hard disk drive businesses into one organizational unit which will be led by Young
Sohn, formerly head of our desktop drive division,'' said Brown.
''Over the past year or so, we have had success in designing products that meet the
performance, quality and reliability requirements of the high-end marketplace and in
demonstrating our ability to work with MKE to ramp products quickly to required
volumes,'' said Young Sohn, president of Quantum's hard disk drive businesses. ''Our
focus now is to build on this success by improving our time-to-market capability to
match what we have been able to achieve on the desktop and by increasing our
operating efficiency. Simplifying our roadmap and leveraging common architectures are
key factors in supporting the time-to-market effort. Leveraging platforms with our
desktop products will enable us to take advantage of higher volumes to lower our
costs as well.
''We are committed to growing our high-end business and to making it an ongoing
profitable business for Quantum, and I believe the steps we are taking now put us in a
position to be able to accomplish that,'' said Sohn.
The charge of up to $35 million is primarily related to the transition to the Company's
next generation of high-end products. It includes severance, asset write-offs, inventory
write-offs, and inventory valuation adjustments. The company stated that it will not
have any further breakdown of categories of the charge until it announces its results for
the third fiscal quarter in January.
Quantum also announced that MKQC, its recording heads operation jointly owned
with MKE, is streamlining operations to help improve operating efficiency and lower
the break-even point. Previously, the company's plant in Louisville, Colorado, served
as a manufacturing launch facility for both wafers and sliders This charge includes
severance, equipment write-offs, lease termination, and other expenses related to
transforming the Louisville, Colorado facility from a manufacturing operation to focus
on research and development. Previously, this facility also served as a launch facility for
both slider/HGA and wafer production. MKQC is modifying its processes to be follow
the model Quantum and MKE use with hard disk drive products in which products are
launched on the volume production line. Slider/HGA and wafer product and process
development and wafer manufacturing will be consolidated in Shrewsbury,
Massachusetts and slider and HGA volume manufacturing will be conducted in Batam,
Indonesia. The operational and process streamlining are expected to result in cost
savings and improvement in time-to-volume to bring MKQC to profitability.
The foregoing statements regarding the Company's transition plan for its high-end
business and MKQC's plan for improving its operations are forward looking
statements and actual results could vary. Factors that could affect actual results include
(i) the actual amount of the non-recurring charge associated with the transition of the
Company's high-end operations, (ii) the Company's ability to reduce costs in its
high-end business operating model, (iii) the Company's ability to make the necessary
changes to improve the overall efficiency and increase the returns of its high-end
business operating model and MKQC's business model, (iv) the Company's ability to
successfully develop and introduce in a timely manner its next generation of high-end
products and the market acceptance of those products, (v) the changing market
conditions and competitive dynamics of the high-end marketplace, and (vi) the
MKQC's ability to meet its time-to-volume goals and qualify its products in Quantum's
high-volume hard disk drive products.
Founded in 1980, Quantum Corporation is the only storage company that has
developed leadership positions in both fixed and removable storage products. One of
the highest volume global suppliers of hard disk drives, and the leader in the mid-range
tape market, Quantum is widely recognized as the industry's quality leader. The
company sells a broad range of storage products to OEM and distribution customers
worldwide. Quantum's sales for the fiscal year ending March 1997 were $5.3 billion.
The company's world wide web home address is quantum.com . |
