What a sad week for Seagate. CEO Bill Watkins (whom I like and have interviewed many times) was ousted and now they are cutting almost 3,000 jobs. Folks we are seeing the beginning of the massive recession or depression. Ok we are knee deep in the financial depression. This is only going to get worse.
Seagate said in an 8-K filing with the SEC that the restructuring moves will result in pre-tax charges of about $90 million, with most of that to be taken in the December 2008 quarter. The company expects the stafff reductions to save $130 million a year.
The company also said it will cut the salaries of its senior staff, with a 25% cut for new CEO Stephen Luczo, “named executive officers” and executive vice presidents, a 20% cut for senior VPs, a 15% reduction for VPs and a 10% reduction for other management, sales, supervisors and professional employees. The savings cuts should save about $80 million annually.
In related cuts in Silicon Valley and Santa Cruz Plantronics is cutting almost 1,000 jobs. Ken Kannapan (a neighbor of mine) is trying to keep the company cash flow positive. Plantronics needs to move the “ball down the field” big time if they want to compete in Unified Communications.
Company officials said revenue and earnings per share for the third quarter of fiscal 2009 will be lower than originally expected. They had projected net revenues of $205 million to $220 million but now are expecting revenues to be $184 million for the third quarter. Final third-quarter earnings will be announced Jan. 27.
The revised revenue estimate is mostly the result of lower-than-expected sales of Bluetooth headsets, but also reflects the impact of broad economic weakness across different product categories, officials said.
As a result of the workforce reduction and other restructuring, officials expect savings of approximately $7.7 million to $8.2 million in the fourth quarter of fiscal 2009. Yearly savings are expected to be more than $50 million. The company also plans a 50 percent reduction in capital expenditures in fiscal 2010.
“As global economic weakness persists, our key objectives are to remain profitable and cash-flow positive, continue to invest in strategic initiatives such as unified communications, and to improve our profitability in our consumer businesses,” said President and Chief Executive Officer Ken Kannappan. “We believe that our strong financial position combined with ongoing strategic investments will allow us to emerge from this downturn in a significantly stronger competitive position.”