The announcement follows an ongoing reorganization at the giant disk maker as the company responds to a rapidly changing storage market. Seagate last week said it would reevaluate operations globally, starting with the layoff of 1,600 in Singapore.
Seagate in May sold its Network and Storage Management Group, a part of Seagate Software, to Veritas Software. The sale, valued at $3.1 billion, included Seagate's Backup Exec line of software storage products. As part of the transaction, Seagate received approximately 69.1 million shares of Veritas stock.
As a result of the reorganization, owners and option holders of Seagate Software stock, including shares from Veritas, will be compensated in the form of Seagate Technology stock. Seagate expects to issue about 8 million shares of common stock in the transaction, which is subject to shareholder approval.
Seagate Software until now had been a majority-owned subsidiary of Seagate that employs 1,100 employees in 30 offices worldwide. Seagate Software earned $142 million in revenue for its 1999 fiscal year, ended July 2.
The parent company, Seagate, has been struggling of late, posting weaker-than-expected earnings for its fourth fiscal quarter of 1999. The company on July 15 revealed earnings of $69 million, or 30 cents a share, on revenue of $1.64 billion compared to $22 million in profits, or 9 cents a share, on revenue of $1.58 billion a year earlier. A consensus of analysts predicted 34 cents a share according to First Call.
The company attributed the results to soft sales of its disk drives and rapidly falling prices due to low-cost PCs. The company also expects lower revenues for its fiscal first quarter 2000.
Seagate established its software subsidiary after acquiring Crystal Services, maker of Crystal Reports, in 1994. Seagate in 1996 bolstered its software storage product line with the acquisition of Conner Peripherals and Arcada Software. Veritas picked up many of those technologies in May.
Seagate Software will continue its reporting and information software business.
Seagate decided to reorganize its software subsidiary because of the disproportionately large number of Veritas shares compared to those for Seagate Software. The parent company also would like to use any future sales of Veritas stock for funding its more profitable core disk drive business.
Seagate estimates it will take a charge of about $216 in the quarter the reorganization closes.
Seagate opened at 34 today on the New York Stock Exchange, with no change as a result of this morning's announcement.