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So when did the knives come out at Seagate?

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

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Immediate future

The Seagate SEC filing said: "Seagate plans to reduce approximately 10-percent of its U.S. workforce in a restructuring program to be announced later this month, when it has notified the affected employees. This restructuring will impact a broad range of departments, including research and development, and is being done in response to the current economic environment." The 10 per cent cut referred to just the US workforce, not the world-wide headcount, meaning about 800 people. Seagate felt it necessary to put the clause in about R&D restructuring. Seagate may now be preparing a more wide-ranging restructuring than Watkins, and possibly Wickersham, would have contemplated. Again we are speculating here. The elements of such a restructuring could include:

- Moving production capacity from high-cost plants to lower-cost ones and moth-balling or closing the idle plants. It is easier to do such things outside the USA and western Europe
- Preparing to lay off more workers (more than 10 per cent)
- Planning a longer-term restructuring of manufacturing to move more of it into low-wage economies in the Far East. This puts plants such as the Londonderry one in North Ireland, and USA plants such as Shakopee and Bloomington, at risk
- Combining the two separate external hard drive lines into one
- Bringing the R&D horizon closer and looking only, say, at the next two generations of hard drive technology and not three or four
- Accelerating the switch to 2.5-inch drives
- Delaying or closing the solid state drive development work. (On the other hand this could be actually accelerated as it is potentially high growth.)

With cash conservation and cost-cutting the likely two main drivers of Seagate's activities over the next couple of quarters, an acquisition of Fujitsu's HDD business looks to be completely off the table.

The company is due to report its fiscal Q2 results (the last calendar quarter for 2008) on January 21. Whitmore, the new COO, will have an awful lot of detailed work to do so that Luczo and O'Malley can present a coherent and clear picture of how Seagate is responding to the results, which may include a loss. Are we looking at revenues of $2bn, or less and possible negative net income of $0.1 -$0.05/share for the quarter?

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