Related topics
  • ,
  • ,
  • ,

So when did the knives come out at Seagate?

To lose one C-level exec may be regarded as a misfortune...

channel

Comment To lose two CxO-level officers in one day is exceptional, even by Seagate standards. Last week's axing of CEO Bill Watkins and the resignation of COO David Wickersham resembled a day of the long knives in Scotts Valley. So how did it come to this?

The events timeline looks like this:

1. At a Barclays Capital analysts' conference on December 10 Watkins and CFO Pat O'Malley talked of Seagate's need, because of the recession, to learn how to make a profit as a $2bn/quarter revenue company, down from the $3bn/quarter company they had become accustomed to. The company was already in the midst of a restructuring (cost-reduction) exercise.

2. Before CES in Las Vegas, Watkins and the board met. This was in the knowledge of a reduced expectation for the final calendar '08 quarter of revenue in the $2.3bn - $2.6bn range (SEC filing Dec 10). They agreed a rough 10 per cent headcount cut, where budget would be spent and where it would be saved.

3. At CES up to and including Friday, both Watkins and Seagate's consumer business president, Brian Dexheimer, spoke fairly freely and said that December revenues had gone off a cliff, that a 10 per cent staff cut was coming, that, in Watkins's view, this was now the time to press ahead with innovation so that you could build market share in the recovery period after the recession, and that he saw no sense in buying Fujitsu's distressed hard disk drive business. There would be/should be more HDD industry consolidation and maybe the Fujitsu HHD business, TDK and Toshiba might form a second Japanese HDD supplier alongside Hitachi GST.

There were no signs that Watkins was contemplating resigning. However, the December revenue figures - flagged as surprisingly bad by Watkins - could conceivably have meant that the final quarter's revenues were going to drop below $2bn.

4. Here we start speculating; over the weekend of January 10 and 11 the Seagate board must have conferred. Someone must have said that they thought Seagate could do something different, and that maybe Seagate could have done better. The company could cut costs more deeply and concentrate more on conserving cash than on continuing product development and innovation to be poised for market capture when the recession ended.

So we can imagine a board consensus about the need for this and an approach to Watkins: "Bill, we think you should cut deeper and spend less on innovation." Watkins may have said no.

Sponsored: How to determine if cloud backup is right for your servers

Next page: Sentiment turned