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7/22/2004

Aggressive pricing brings Seagate earnings down 17.5%

By Paula Aven Gladych
The Daily Times-Call

LONGMONT — Seagate Technology’s earnings for fiscal year 2004 were down 17.5 percent from 2003.

Company executives blamed the decrease on aggressive pricing in the electronic storage industry, multiple competitors vying for customer demand and longer product cycles.

For the year ending July 2, Seagate earned $529 million on revenue of $6.22 billion, compared to earnings of $641 million on revenue of $6.49 billion in 2003.

For the fourth quarter, Seagate lost $33 million on revenue of $1.34 billion. That included a $39 million restructuring charge. During the same quarter in 2003, Seagate earned $160 million on revenue of $1.55 billion.

Seagate, which employed 1,250 people at its Longmont facility before it announced layoffs in June, makes storage products for the electronics industry.

The company announced it would cut 7 percent of its global work force, including an unspecified number of workers in Longmont. Company officials have repeatedly refused to break those numbers down by location.

Seagate sells its drives in the enterprise, desktop, mobile and consumer electronics industries. While demand for desktop storage products has been weak, demand for mobile electronics has continued to rise.

Seagate sold only 460,000 mobile storage units in a 12.1 million-unit industry.

The company plans to deliver two new notebook disc drives by the end of the calendar year to address its weak market position in that area, officials said in Seagate’s quarterly earnings report.

Seagate nearly doubled its shipment of consumer electronic units quarter-over-quarter, shipping 1.9 million units during the June quarter. The company predicts the market for consumer storage products will rise to between 8 million and 10 million units from its current 6.3 million units, based on recent market growth rates for digital video recorders, digital music players and digital cameras.

The average price per unit declined about 5 percent during the quarter.

Seagate President and CEO Bill Watkins said that looking ahead, the hard-drive industry continues to face challenging times, but “we believe the industry is showing some signs of improvement.”

The company has aligned its cost structure with the increase in customer demand. It also has plans to introduce many new products in the next couple of quarters and is confident the company will be “able to operate profitably,” Watkins said. “As new products ramp up volume, there should be ongoing financial improvement. The company continues to look at opportunities for further cost reduction and restructuring charges.”

Paula Aven Gladych can be reached at 303-776-2244, Ext. 211, or by e-mail at pavengladych@times-call.com.