Maxtor to axe more US jobs

Loss widens

DVD it in many colours

Maxtor's recently announced decision to abandon its 2.5in notebook hard drive project helped keep the company in the red, to the tune of $70m (28 cents a share) during its fourth quarter. The three months to 25 December 2004 yielded revenue of $1.03bn, down 11.9 per cent on Q4 2003's $1.17bn .

Expect more losses: the hard-drive maker expects to reduce headcount again in 2005, by at least 200.

Maxtor shipped 563,000 SCSI drives into the enterprise market, and 1.26m units into consumer electronics applications. Total shipments were 14.7m drives. Gross margins grew sequentially from 6.4 per cent to 8.1 per cent. The average unit selling price rose to $70 from $67 in Q3, contributing to a sequential revenue increase of 11.2 per cent from Q3's $927.2m.

Maxtor reported a variety of one-off charges, including $25m toward the cost of cancelling the 2.5in drive scheme, but some exceptional gains too. As a result, the quarter's $70.2m net loss is less than the $90.6m lost in the previous quarter, when the bottom line was depleted by restructuring costs.

However, Maxtor's Q4 operating loss was $63.01m, worse than the $58.3m it posted in Q3, in spite of improving gross margins and rising ASPs. No wonder company president C S Park said the figures "reflect an uncompetitive cost and expense structure, primarily on our desktop business". However, "Maxtor's core results were better than we anticipated in December", he added.

In Q4 FY2003, Maxtor recorded a net income of $39.2m (15 cents a share) and an operating income of $44.01m.

For FY2004, Maxtor recorded revenues of $3.8bn, down 7.1 per cent on FY200 ($4.09bn). The company lost $181.9m (73 cents a share) during the year, compared to income of $102.7m (41 cents a share) in 2003. Annual operating loss was $179.9m, compared to an operating income of $130.02m last year.

Park said the company will now work to "rationalise the product roadmap, improve our cost structure and reduce operating expenses". The elimination of the 2.5in HDD line is part of that programme. So is the plan to "reduce [the] US headcount by up to 200 over the course of the year", he said.

"Some of the benefits of these activities will be evident in our financial results in 2005 and some will accrue as we move into 2006," Park added. ®

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