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Y2k bug eats StorageTek jobs

Stalled sales lead to major job cuts

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StorageTek is to chop 20 per cent of its workforce after reporting tumbling Q3 profits. The US storage vendor reported a net loss of $16 million for the quarter ended 24 September 1999. This included pre-tax charges of $32.4 million, relating to litigation and a voluntary staff redundancy program. For the same period last year, the storage giant recorded a profit of $50.6 million. Sales were $573.7 million, against $571.1 million. David Weiss, StorageTek chairman, president and CEO, said Q4 results would match Q3, with sales for 2000 smaller, but with higher profits. "Performance in the third quarter was affected by revenue growth that was below our expectations as well as disappointing margins in our consulting and integration services businesses. "We did not bring to revenue enough of the products under evaluation at customer sites," said Weiss. "Some of this was due to customers delaying purchase decisions because of their Y2K testing issues. "I expect these issues will continue to be felt more in our mainframe market rather than in our growing client-server business into the first quarter of 2000. Revenue from storage products was down seven per cent to $355.7 million. Tape revenue grew, but disk sales suffered due to declining sales to IBM. Big Blue announced earlier this year that it would stop buying StorageTek's disk array products, which it was reselling under its own brand, to develop its own rival technology. This left the 6,000 customer base up for grabs. StorageTek outlined a restructure plan, saying it hoped to save up to $150 million annually. It will run until the second quarter of 2000 with between 1,500 and 1,750 job losses worldwide. The company will also cut investment in areas including consulting, integration and managed storage, and simplify its sales model. According to Weiss: "We are focusing our resources on the businesses where we have done well and see the best opportunity for profitable growth." "Tape automation is our cornerstone, a reliable cash generator with significant areas of growth potential. "Storage area networks and virtual technology are our two most promising areas for significant future growth, in both tape and disk." ®

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