Seagate cuts go deep
3,000 axed - not 800
Going further than its previous 10 per cent US workforce cut targeted by a recent SEC filing, Seagate has made another filing saying 6 per cent of its worldwide workforce will go and executives and other professionals will take pay cuts.
This comes two days after the replacement of its CEO, Bill Watkins, and COO, David Wickersham, had been announced.
The SEC filing says: "The Plan includes reducing worldwide headcount by approximately 2,950 people, representing approximately 6 per cent of its global employee headcount, which is inclusive of the previously disclosed 10 per cent reduction of the U.S. workforce." Previously it had been reported that a worldwide 10 per cent cut was expected.
The filing continues: "The Plan, which the Company expects to largely complete by the end of the March quarter, is expected to result in total pretax charges of approximately $90 million. These charges will primarily be incurred in the December 2008 quarter, and will consist mainly of employee termination costs, with the majority of cash payments expected to be paid in the March 2009 quarter. The savings generated from these restructuring activities are expected to amount to approximately $130 million annually."
It goes on to say: "In connection with the Company’s overall cost reduction strategy, the Company expects to reduce salaries of certain employees, including its named executive officers, as follows: 25 per cent for Chief Executive Officer, Named Executive Officers and Executive Vice Presidents, 20 per cent for Senior Vice Presidents, 15 per cent for Vice Presidents, and 10 per cent for management, sales, supervisors and professional employees. The salary reductions are expected to be finalized shortly and become effective in February 2009. The estimated savings generated from these salary reductions are expected to amount to approximately $80 million annually."
The total savings look to be $210 million annually.
So the potential faultlines of the disagreements between Watkins and the board are emerging, with 800 US jobs now subsumed into 2,900 worldwide jobs going, 6 per cent of its global headcount. These are in the same areas as Western Digital's 5 per cent cut, which is being accompanied by manufacturing plant shrinkage. It is expected that more details will come out about Seagate's plans and they will possibly include some kind of manufacturing capacity reorganisation.
Some analysts expect more cuts later this year.
The Springtown hard drive component plant at Londonderry in Northern Ireland will lose up to five people it is reported. About 450 people, a third or so of the 1,400 workforce, mostly salary-grade professionals, will suffer a 10 per cent pay cut. It could have been worse. 1,900 jobs are set to go at Dell's Limerick plant as the manufacturing moves to Poland. This Seagate salary grade pay cut is part of the worldwide pay cut for such staff.
The new COO, Robert Whitmore, will have his work cut out as he assimilates his new area of responsibility and works out what can and can't be done. ®