Falling margins, prices push Maxtor into the red

Q3 reverses Q2 trend

fingers pointing at man

Maxtor fell back into the red during its third fiscal quarter, it admitted this week, after a brief foray into profitability during Q2.

The hard drive maker reported revenues of $926m for the three months to 1 October 2005, only fractionally higher than Q2's $925m, and fractionally down on Q3 FY2004's $927m.

Maxtor shipped more drives in Q3 than the previous quarter, with SCSI shipments up 5.3 per cent, desktop-drive shipments up 15.7 per cent and consumer electronics-oriented product shipments up seven per cent.

But while Q2 had been a profitable quarter, Q3 wasn't, thanks to falling gross margins - down sequentially from 13.2 per cent to 11.1 per cent - and ASPs down from $77 to $70 over the same period.

"The gross profit margins on our desktop products were constrained due to a previously-announced production problem at our internal media operation," said CEO and chairman C S Park. "The production issue limited our supply of media, increased costs associated with scrap and yield and led to a less than favorable customer mix."

The result was a net loss of $17m (seven cents a share), better than the year-ago quarter's $95.1m (38 cents a share) loss, but down on Q2's $9.4m net income.

Park said the production problem has now been resolved and that the company doesn't anticipate that media will hinder Q4 performance. ®

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