Seagate will cut 3,000 employees in latest sign of major PC and cloud slowdown
Published Wed, Oct 26 2022 10:17 AM EDTUpdated Wed, Oct 26 2022 9:26 PM EDT
Tony Avelar | Bloomberg | Getty Images
Hard drive maker Seagate Technology said Wednesday it plans to cut 8% of its global workforce, or about 3,000 employees, citing economic uncertainty and declining demand for its parts.
"In addition to adjusting our production output, to drive supply discipline and pricing stability, we are implementing a restructuring plan to sustainably lower costs, including reduction in our global workforce," Seagate CEO Dave Mosley said on a call with analysts.
The restructuring plan was announced after Seagate reported fiscal first-quarter earnings that missed Wall Street expectations for revenue and earnings per share.
The company's shares fell more than 7% during trading Wednesday and are down over 55% so far in 2022.
Mosley added that Seagate's customers, which include cloud providers, have a buildup of parts inventory because they are spending less on computers. He said he doesn't expect Seagate's customers to finish using up their parts backlogs in the current quarter.
The company will maintain paying a dividend, Mosley said.
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Seagate makes hard drives and other parts often used in PCs and cloud servers.Seagate's layoffs are the latest sign that demand for PCs and cloud servers is deteriorating after two boom years driven by the coronavirus pandemic.
On Tuesday, Microsoft, which makes the operating system for most PCs, reported that Windows licensing sales dropped 15% on an annual basis. Microsoft's cloud business also came up short versus expectations.
Seagate said that its restructuring plan, which includes the layoffs, would save the company about $110 million per year and would be completed by the end of the company's March quarter. It said it expected to pay pretax charges of about $65 million, mostly for severance and other termination benefits.
Seagate reported adjusted fiscal first-quarter earnings of 48 cents per share on Wednesday, significantly below FactSet consensus expectations of 71 cents per share.
Seagate's revenue was $2.04 billion, which also came in under the FactSet consensus of $2.1 billion.
Seagate said it expected $1.85 billion in revenue in the current quarter, below FactSet expectations of $2.12 billion.
