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Seagate hints at job cuts despite 'strong' quarter

Sales rise, earnings rocket sequentially

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Hard-drive maker Seagate made big gains in sales and earnings during its most recently completed quarter, Q2 FY2005, the company reported this week.

However, it hinted that further job cuts beyond the 3000-odd redundancies made in 2004 may be necessary to maintain the company's momentum.

The three months to 31 December 2004 netted Seagate income of $144m (29 cents a share) on revenues totalling $1.85bn. The December period is traditionally a strong one.

The figures are, respectively, 167 per cent and 18.6 per cent up on the previous quarter's totals. But while Q2 FY2005's sales were just over five per cent up on the year-ago quarter's $1.76bn total, year on year net income was down almost 30 per cent.

The change between the two year-apart quarters is the shift toward lower-priced consumer electronics drives from higher-margin enterprise-oriented kit.

The latter market segment is picking up, though. Seagate shipped 3.3m enterprise-class drives in Q2 FY2005, a record number. It shipped some 3.4m CE drives plus 1.2m mobile units. The big sales were in the desktop space: Seagate shipped 16.3m drives here. Almost a quarter of them were Serial ATA products.

In total, it shipped 24.2m units, up 12 per cent on the previous quarter.

Looking ahead, Seagate said its current quarter should see sales fall between $1.84bn and $1.87bn - the same, in other words, as the December quarter, though that's no bad thing given how weak the March quarter traditionally is when compared to its predecessor.

The company expects earnings of 29-33 cents a share. But it warned that the range is "excluding any restructuring charges", an odd thing to mention unless Seagate is anticipating having to undergo such a process. Last June, the company rid itself of around 3000 workers. ®

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