Xerox to Close Its Shugart Disk-Drive Manufacturer

Xerox Corp. announced plans Wednesday to close its money-losing Shugart disk-drive maker in Sunnyvale, Calif., and take an $85-million charge against 1984 earnings.

The move, which will eliminate 1,650 jobs, is the latest setback in the Stamford-based company’s attempt to diversify from its slow-growing copier business.

Xerox quit the portable-computer market in May and expects to post an operating loss from its office-automation systems for the second year in a row.

Shugart, which employed as many as 3,900 in mid-1983, mostly in Sunnyvale, suffered unspecified operating losses last year, Xerox said. It attributed the problem to overcapacity in the disk-drive industry. (A disk drive is used in computers to read and store data on magnetic disks.)

“Rather than invest in a long and costly recovery program, the company felt its most prudent course is to make an orderly exit from the business,” Xerox said in a release, noting that “the Shugart businesses are not strategically important to the corporation’s long-range plans.”

Its decision to rid itself of the unit had been rumored for more than a year and came as no surprise to Wall Street, according to Eugene Glazer, who follows Xerox for Dean Witter in New York. Glazer said that the unit had become “totally unnecessary” since Xerox has done so poorly with its line of personal computers and word processors.

Shugart has been selling disk drives exclusively to other manufacturers for use in computers marketed under the suppliers’ own names.

Xerox also said that it has agreed to sell the unit’s 5-inch disk-drive business to Matsushita Communication Industrial Co. for an undisclosed price and that negotiations to sell its other product lines are continuing.

Shugart’s closing will leave Xerox with one other subsidiary that makes hard computer disks and memory-storage devices--Century Data Systems--which the parent said that it will continue to support. Glazer said that Century has been struggling also under the same conditions that doomed its sibling.

Shugart was bought from private owners in December, 1977, for $41 million in Xerox stock. It has had profitable years since then, said Tom Abbott, a Xerox spokesman, but he declined to say when.