Saturday, January 17, 2009

Seagate To Slash Head Count, Cut Salaries

By Joseph F. Kovar, ChannelWeb
5:59 PM EST Wed. Jan. 14, 2009
Seagate is stepping up cost-control measures, including new layoffs and executive pay cuts, in the wake of the economic downturn.

The new measures, detailed in an SEC filing on Wednesday, go beyond the measures the hard drive vendor announced just two days ago.

Seagate on Wednesday said it is reducing worldwide head count by about 2,950 employees, or about 6 percent of its global workforce. This number includes the planned cut of about 10 percent of its U.S.-based workforce the company unveiled on Monday. No additional cuts in the U.S. workforce were announced in the Wednesday filing.

The cuts are expected to save the storage vendor about $130 million annually, Seagate said in its filing.

Seagate is also planning to reduce the salaries of many of its employees.

This includes a 25 percent salary cut for its CEO, other executive officers and executive vice presidents; a 20-percent cut for senior vice presidents; a 15-percent cut for vice presidents; and a 10-percent cut for management, sales reps, supervisors and professional employees.

The salary cuts are expected to save the company about $80 million annually, Seagate said.

The moves are the third major action taken by Seagate to control costs in the face of an economic downturn and a slowdown in PC sales, which are impacting its sales of hard drives.

On Monday, in addition to the cut in U.S. head count, Seagate also shook up its executive lineup with the planned departure of its CEO and the abrupt resignation of its president and COO, leaving the chairman, president and CEO functions all in the hands of longtime Seagate veteran Stephen Luczo.

In December, Seagate slashed its revenue and operating result expectations for the quarter and mandated unpaid furloughs for much of its staff during the holidays as a cost-cutting measure.

The moves correspond to a slowdown in the hard drive industry.

Analyst firm iSuppli said in December that a global slowdown in the demand for PCs and other electronic products means that global shipments of hard drives will be flat at best, and could actually decline during the fourth quarter of 2008, compared to the third quarter.

ISuppli's more optimistic and more likely forecast calls for global hard drive shipments of 157.5 million units, essentially flat with the 158.3 million shipped in the third quarter, meaning that total 2008 shipments would be up about 15 percent compared to 2007.

In its pessimistic forecast, iSuppli said fourth-quarter shipments could be as low as 149.4 million units, about 10 percent less than originally forecast in September. Meanwhile, average selling prices will continue to fall, putting a drag on overall vendor revenues, iSuppli said.

ISuppli also said that 2009 hard drive shipments could grow as high as 6.8 percent or as low as 4.3 percent over 2008, and that growth would be fueled by demand from notebook PC and server markets.

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