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Quantum DSS sees Q4 charge, layoffs

Quantum DLT & Storage Systems Group (NYSE: DSS) will spend up to $65 million to cut about 900 jobs in its DLTtape unit and move some operations to Malaysia.

After market close Wednesday, Quantum said it would take a fiscal fourth quarter restructuring charge ranging between $40 million and $65 million. The company will lay off 400 employees in the tape division's regular work force and 500 temporary workers, and shift volume DLTtape drive assembly to Penang, Malaysia from Colorado Springs, Col.

The Colorado plant will become be used for new products, including next-generation tape drives scheduled to start mass production in the second half of calendar 2000.

"As growth rates shift in the various segments of the tape market over the next few years, it is important for us to adjust our operating model and cost structure in a way that positions us strongly for the future," said Barbara Nelson, vice president and general manager of the DLTtape division.

Restructuring will start with immediate cost-cutting that includes firing 125 regular and 125 temporary workers, the company said. The second phase will happen as 125 temporary jobs are lost when DLT 4000 product assembly moves to Malaysia. The final stage, including 260 regular and 260 temporary layoffs, is scheduled to start in the second half of calendar 2000 as DLT 7000 and DLT 8000 assembly goes to Penang, the company said.

The moves unveiled Wednesday represent an acceleration of cost-cutting strategies originally planned for fiscal 2001, said John Powell, vice president of DLTtape operations.

Quantum DSS Group issued two warnings before recently reporting earnings of $51 million, or 30 cents per share, in the recently ended fiscal third quarter. The DLTtape unit generated 45 percent gross margin during the quarter, and sales of tape media generated more than half of the overall group's operating income.

The fastest growing segment for Quantum DSS is storage systems, expected to boost revenue 40 to 45 percent annually, the company said. Storage systems now generate more than 20 percent of the company's total revenue.>