Seagate Technology to cut about 6,500 jobs; stock jumps 22%
Data storage company Seagate Technology said it will cut about 6,500 jobs — about 14% of its global workforce — by the end of June 2017, even as it announced good news about its recent sales figures. Shares soared nearly 22%.
The company said late Monday that the job cuts were part of a restructuring plan that would consolidate Seagate’s global presence across Asia, Europe, the Middle East, Africa and the Americas.
Seagate said Tuesday that it had not yet released the specific number of job cuts per region, but that it would be focused on reducing its “manufacturing footprint.” much of which is in Asia, though there is some presence in the U.S. and Britain.
The company is based in Ireland but has its U.S. executive offices in Cupertino, Calif. If Cupertino is affected by the staff reductions at all, Seagate said in an email, the number of job cuts there would be “very small.”
The restructuring is expected to cost the company about $164 million in pre-tax charges during fiscal 2017, $82 million of which will be employee termination costs, according to a filing with the Securities and Exchange Commission.
Like other manufacturers, Seagate has struggled to adjust to the decline in the hard-disk-drive industry and has seen sales of its desktop and notebook drives drop, said Mark Miller, senior hardware analyst at Benchmark Co.
“They’re coping with a slowdown or decline in the PC industry,” he said. “At the same time … you’re seeing displacement of hard drives with solid state [drives].”
Seagate recently acquired several solid-state companies, but those firms have not performed as well as expected, Miller said.
At the same time as Seagate announced the job cuts, it touted preliminary earnings for its fourth quarter, which ended July 1. It said its revenue was about $2.6 billion, up from the $2.3 billion it had forecast.
The company attributed the difference to “better than expected” demand for its enterprise hard- disk-drive portfolio, which is used for cloud-based storage.
Shares of Seagate jumped 21.8% to close at $29.35 on Tuesday.
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