Seagate will not shut down any Malaysian plants

Posted on October 13, 1999 
Filed Under CNET, Julian

By Julian Matthews

PENANG–Seagate Technology, the world’s largest disk drive manufacturer, will not shut down any of its seven Malaysian plants, said a senior executive.

“We do not have any plans on the table to close any factory in Malaysia,” assured Seagate chief financial officer Charles Pope in a teleconference to announce the company’s first quarter results for fiscal 2000.

Last month, Seagate Malaysia offered voluntary retrenchment packages to its staff as part of a worldwide restructuring plan to bring headcount down by 10 percent.

The company employs about 15,500 staff in seven plants in Penang, Prai, Ipoh, and Senai.

Pope said Seagate had reduced headcount from 81,953 in June to 77,847 in September and was still on track to meet its June 2000 target of reducing headcount by 8,000 worldwide–mostly coming out of Asian operations.

The reductions would result in charges of US$200 million and would save the company about US$150 million a year.

“It is a difficult situation to have to release employees, (but they are necessary in order) to remain a financial and viable company. The restructuring is not a reflection of a company in trouble but is to stay out of financial trouble. We want to take action quickly to remain profitable even in this extremely difficult conditions,” he said.

Seagate posted profits of US$2 million on revenue of US$1.682 billion for the quarter compared with a loss of $30 million and revenue of $1.553 billion from a year ago.

Pope said the “heydays of high revenue growth” may be over as the company had flat revenue growth in recent quarters, and that “extremely aggressive” pricing had forced Seagate to become a “leaner company”.

“Pricing was extremely aggressive in the last quarter and we expect it to remain so this quarter,” he said.

Intense pricing pressure and excess production has plagued makers of disk drives and data-storage components for the last two years. Other American rivals have been similarly affected with Western Digital announcing cuts of 2,500 and Quantum about 800 jobs In August.

The cuts may have been prompted by a need to stay in step with emerging Asian players like Fujitsu, Samsung and Hyundai (Maxtor).

Pope said most of Seagate’s cuts would be in Asia because between 80 and 90 percent of its manufacturing staff were based in the region.

Seagate made similar cuts of about 10,000 last year, the majority of which were from Asia. It currently has over 60,000 staff in plants in Malaysia, Thailand, Singapore, China, and on Batam island in Indonesia.

Pope confirmed that a plant in Philippines was never commissioned and the company was looking for a buyer. He also refuted a claim that Seagate would produce disk drives in Thailand–which currently produces only head assembly drive components.

“We have excess capacity for drives around the world, it would be inappropriate to expand capacity anywhere at this point in time,” he said.

Pope said the Asian contribution to overall revenue has fluctuated from 18 to 20 percent from quarter to quarter and he does not expect this to change in coming year.

In Malaysia, the retrenchment exercise is expected to involve staff in the three plants in Penang and two in Ipoh making thin-film recording heads.

The package has been described by some staff as attractive. It includes two months salary in lieu of notice, plus a month as an incentive to take up the offer, and 1.375 month bonus pro-rated from the time the staff joined. Those accepting the retrenchment will also get a severance pay of one month for each year of service. On the average, staff planning to leave can expect a minimum of four months wages.

Published in CNET Asia, Oct 13, 1999.

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