Sad Day For Seagate and Plantronics- Seagate CEO Ousted & 3,000 Jobs Cut – Plantronics Slashing Close to 1,000 People

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.”

Silicon Valley Rumblings – Will HP Buy Seagate?

HP has been on the move lately. Expanding on the services business by buying EDS. What should HP do next? Buy Seagate?

Seagate (NYSE: STX) would give HP access to a major cloud position with storage in the cloud. Seagate known for their OEM drive business and enterprise storage recently launched a consumer business over 1 year ago. Why this might be interesting for HP and Seagate – HP has been a big customer for years of Seagate but HP could gain a foothold in the ‘cloud computing’ sector with Seagate. Seagate’s consumer line would certainly get a ‘shot in the arm’ from HP’s massive consumer presence.

Although this isn’t a full fledged rumor, it certainly is a conversation around Silicon Valley according to sources. I will dig into this more but I would buy the consumer brand and cloud services from Seagate and leave the OEM business alone. Seagate’s market cap is currently $10 billion as of today.

Tech Stocks STX: CEO Bill Watkins – He Gets No Respect

Bill Watkins has Seagate pumping but he gets no respect from Wall Street.  Cnet’s Charles Cooper has a very good interview and story with and about Bill Wakins, the CEO of Seagate.

I’ve been doing an earnings podcast with Bill for most of the last 6 qtrs and have watched how he’s managed to keep Seagate focused.  He’s navigated Seagate through price wars, product changes, big acquisitions, and now a sagging Dow.  He’s like Rodney Dangerfield of tech stocks – “he gets no respect”. 

Here are some of the earnings podcasts that I’ve done with Bill Watkins.  The best part of web 2.0 media is the historical record or archive.  Lets take a listen to Bill over the past two years.

Here is the CEO Bill Watkins – story since 2006.  On the record with me on his company and his performance.   With Seagate generating over $700 million in cash, over $500 million in free cash, no inventories, and double-digit growth, what will it take for Wall Street to wake up.  Bill keep on podcasting. 

Earnings Q1 2008 – Brian Dexheimer, Chief Sales and Marketing Officer sat in for Bill Watkins

Earnings FY 2007  & Q4 2007 – July 2007

Earnings Q3 2007 – April 2007

 Earnings Q2 2007 – January 2007

Earnings Q1 2007 – October 2006

Earnings FY 2006 – August 2006

June 2006 Bill Watkins

Storage Business: Record Everything for Seagate – Is it Breakout Time for the Stock?

The storage business is red hot.  Why?  We all need more storage.  Seagate puts out their earnings and yesterday I sat down with Seagates Chief Sales and Marketing executive, Brian Dexheimer, to preview today’s Q1 earnings result.   Sales are soaring.   Here is Seagate’s press release. 

Update: Eric Savitz reports that Bill Watkins says that he has sold out Q4 and can’t deliver on all the orders.   Bill in his own style says to Eric “I have tons of orders I can’t fill.”

The results were awesome for Seagate.  Record everything…shipments, revenue, net income, industry shipments, new products,..etc.  The stock has been hovering and seeing a resistance at and around $28 per share for two years.  Will it break through and go higher and higher?  We shall see.  The disk drive business is changing and so is Seagate. 

Highlights from my video podcast with Brian Dexheimer:

  1. 132 million units a record for the industry
  2. shipments represent 36% of the entire industry shipments
  3. margin expansion 25 points
  4. $3.3 billion in revenue
  5. 60 cents EPS (non gaap); started at 44 cents at the beginning of the qtr
  6. pricing dynamics – best conditions in all of the past 4 quarters
  7. demand was strong
  8. strongest trend in the overall growth is in the high capacity area
  9. hottest area is the digital home

Seagate is seeing the results of the Maxtor acquistion in terms of leverage and scale in the gross margin expansion  –  operational efficiency.   Solid state disk drives will be upcoming on the horizion.  Branded products up and the upcoming qtr looks strong.  New security solutions are doing well with the demand for secure data.  Average sale for the consumer side is over 350 GB. 

Seagate has a strong presence in the consumer, enterprise, and the emerging web 2.0 service provider area.  The web 2.0 service provider area includes Google, Facebook, Myspace, and many new niche applications such as surveilllance among others.

Seagate has a secret weapon.  Green Disk Drives.  Green drives are a major growth area.  On the clients side the hybrid is looking good – combing flash and rotating storage to reduce the power budget of the PC which frees up battery life and screen life..  On the enterprise side there is a tremendous shift toward small form factor devices.  These devices are consuming 35% less power and 40% of all their shipments came in the area of the new form factor. 

The industry is still cyclical, but the cycle has dampened – lower lows and higher highs.  This is due to the consolidation in competition and in the supply chain components available (motor, heads, media, etc).  This leads to efficiencies and scale that gives Seagate more margin room.  Also it gives Seagate stabilized component prices, fewer competitors, and allows them to gain more scale and more efficient business models from the stability in competition and critical component prices.  The storage business is turning into a major growth sector. 

Price wars?  There is a change in behavior in pricing from competitors. 

What’s different?  Seagate has multiple business growth areas.  Single biggest trend is in the digital home – 70-80% growth and it’s early.  Storage deployment in the home is a nice growth area to compliment their traditional enterprise area.  Add the consumer electronic market and Seagate is now twice as big.  Seagate will approach $13 billion this year.

Seagate is breaking out and breaking records.

Here is the video of my exclusive interview with Brian DexHeimer

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On the strength of 47 million disk drive shipments, the Scotts Valley, Calif., company reported revenue of $3.29 billion, vs. $2.79 billion in the year-ago period. Analysts polled by Thomson Financial expected revenue of $3.22 billion.

Seagate reported GAAP net income of $355 million, or 64 cents per diluted share. Excluding charges associated with the company’s acquisitions of Maxtor and EVault, Seagate earned $385 million, or 69 cents a share. Analysts predicted earnings of 64 cents a share.

“The first fiscal quarter has historically been a strong one for Seagate, and this year, we benefited from unit demand greater than expected,” CEO Bill Watkins said in a company statement. “We believe we are well positioned to continue driving year-over-year revenue growth, and these record quarterly results demonstrate the effectiveness of Seagate’s business model.”

In other tech stocks Intel’s Q3 profit surges 43% .  IBM profit is up. Yahoo is slightly down but beat the streets estimates.