Western Digital CEO Haggerty to Retire

Charles A. Haggerty, who guided one of the world’s largest computer disk drive manufacturers, Western Digital Corp., through periods of explosive growth followed by a devastating slump, said Tuesday that he will retire by next June.

The Irvine company said it has launched a search for a successor and simultaneously announced a management restructuring to streamline decision making and make Western more customer-oriented.

During Haggerty’s six-year tenure as chief executive, Western Digital, one of Orange County’s seven Fortune 500 companies, saw its revenue more than quadruple, peaking in 1997 at $4.2 billion, only to fall back since then as the industry has gone through one of its steepest downturns.

The company is expected to post its seventh consecutive quarterly loss today when it issues its earnings report for the fourth fiscal quarter ended June 30. Previously, the company said it would lose as much as $88.8 million, which would push its losses for the last seven quarters to more than $830 million.

Haggerty said he believes, however, that the company will begin to bounce back this year. “I am totally satisfied today that my team has a structure and strategy in place that will take the company to profitability in the current fiscal year,” he said.

Haggerty, 57, said he has been talking to the board for three years about finding a successor. He started with the company in 1992 as president and chief operating officer before being promoted to chief executive in 1993.

The company said it is restructuring management to improve responsiveness to market conditions. The move is an extension of a reorganization announced in January, when the company said it would lay off as many as 750 employees worldwide.

On Tuesday, officials said 850 positions have been eliminated and did not rule out the possibility of more cuts in the work force.

“As we go forward, we need to continue to look at our population and how they can continue to be effective,” Haggerty said.

The company, which this year has sold off some of its operations and shut down a plant in Singapore, now employs just under 10,000 people, down from more than 16,000 in 1997, Haggerty said.

The company also has eliminated 14 vice presidents from its payroll, Haggerty said, a 25% cut.

The new structure moves away from separate operating units that duplicated some functions while centralizing manufacturing and research and development operations, the company said.

The company established two major units--a worldwide operations structure under Executive Vice President Matthew Massengill, and a research and development organization headed by Senior Vice President Russell Stern. Both will report directly to Haggerty.

Haggerty’s pending retirement did not surprise those close to the company. Kathryn Lewis said Haggerty had mentioned retirement to her last August, when she retired as president and chief operating officer of the company’s largest division.

“The drive business is rough and it can wear you out, and I can understand where he’s coming from,” she said.

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Haggerty, who spent 28 years at IBM before joining Western Digital, took the reins of the disk drive maker in 1993, just as the industry was plunging into one of its frequent price wars. Under the first four years of his tenure, the company saw record earnings, peaking at $267 million in 1997.

But last year, with the industry in its cyclical downturn, the company lost a record $290 million.

Analysts expect the company to return to profitability by the end of this fiscal year next June, and Haggerty said he hopes to be able to hand to his successor a company in the black.

“We’ve made a lot of money, and certainly we have lost some, but we’ve been able to grow the company significantly,” Haggerty said.

The key to the company’s future is diversifying out of computer disk drives, which have become commodities, Haggerty said, and his successor will have the vision to do that.

The company already has begun initiatives with Sony Corp. to develop audio-visual digital storage systems for consumer electronics such as VCRs. Earlier this year, Western Digital acquired Crag Technologies, a San Jose firm that develops storage management software.

The company made the announcements after the market closed. The stock fell 13 cents a share to $5.94. Last week, the stock hit $5.81, its lowest point since February 1994.

The search for his successor might take as long as six months followed by a transition period, said Haggerty, who in retirement hopes to spend more time with his wife, Carleen.

“I’ve been telling my wife for years that I would be getting out of this,” Haggerty said.