Seagate Technology, a well-known developer of hard drives, announced Wednesday, Oct. 26, its plan to lay off roughly 3,000 of its global employees - around 8% of its workforce - due to economic uncertainties and falling demand for its products.
"In addition to adjusting our production output, to drive supply discipline and pricing stability, we are implementing a restructuring plan to sustainably lower costs, including [a] reduction in our global workforce," Seagate CEO Dave Mosley told investors on a teleconference, CNBC reported.
The reorganization plan followed a report of the company's fiscal first-quarter profits that fell short of Wall Street projections for sales and earnings per share.
Mosley ensured that the corporation would continue to pay a dividend.
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The Dismal of Seagate's Revenue Report
Seagate manufactures hard disks and other components that are often used in desktop computers and cloud servers.
The company's revenues tumbled well over 7% in trade on Wednesday and are down more than 55% so far this year.
It just posted fiscal first-quarter financial results that fell short of analyst estimates.
Bloomberg reported that sales for the three months ending Sept. 30 were $2.04 billion, falling short of analysts average forecast of $2.12 billion, according to a statement issued early Wednesday by the Fremont, California-based firm. This compares to an expert consensus of $2.2 billion. Adjusted profits per share were 48 cents, much below the 75 cents predicted.
Seagate expects revenue of roughly $1.85 billion and adjusted profits per share of about 15 cents in the current quarter. It would be the first quarter with less than $2 billion in sales since 2005.
Mosley estimated that Seagate's employment cuts, which equates to around 7.5% of total personnel, would result in annualized savings of about $110 million when fully realized in the fiscal third quarter of 2023. It said it expects to pay around $65 million in pretax expenses, largely for severance and other termination compensation.
A Sign of Major Downturn in the PC and Cloud Market
Mosley pointed out that Seagate's clients, which include cloud providers, are stockpiling components since they are spending less on PCs. According to him, the consumers will not be able to use up all of their component backlogs in the current quarter.
The layoffs at Seagate are the latest indication that demand for PCs and cloud servers is dwindling following two boom years fueled by the coronavirus outbreak.
On the other hand, Microsoft reported on Tuesday, Oct. 25, reported a 15% reduction in its yearly license revenue. Microsoft's cloud business also fell short of expectations. The said firm is a tech giant that produces the operating system for the majority of PCs.
Aside from the economic downturn, a strain on expenditure caused by high inflation has something to do with businesses, forcing them to focus on employee costs.
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Written by Trisha Kae Andrada
