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Seagate takes $50-60 million charge

The world's leading hard disk drive vendor says it is taking a one-time charge related to the restructuring of worldwide operations.

Seagate, the world's leading hard disk drive vendor, announced today that it is taking a one-time charge related to the restructuring of worldwide operations while it announced a new drive for the low-cost PC market.

Seagate expects to take the one-time charge in the third quarter of fiscal year 1999.

"This includes the previously announced closure of the company's microelectronics manufacturing facility in Livingston, Scotland, consolidation of global customer service facilities, and additional actions necessary to further increase the productivity and efficiency of worldwide operations," the company said in a statement.

Seagate reported improved earnings in January that beat most analysts' expectations, helped by cost-cutting and a rebound in the computer storage industry.

Seagate expects the charge to be "in the range of $50 million to 60 million." Seagate also said that the sale of its Seagate Software NSMG operation to Veritas is now expected to close during its fourth fiscal 1999 quarter.

Last fiscal year, Seagate results were buffeted by plant closings and layoffs. The disk drive giant lost $530 million in total last fiscal year because of intense competition, declining prices, and delays in getting products to market. It pushed out founder Alan Shugart as chief executive officer last July as the losses were reported.

Also, Seagate today introduced new hard disk drives for the burgeoning sub-$1,000 PC market. The new U4 model is one of the first drives in this market from Seagate based on technology it refers to as "Ultra ATA/66."

The technology offers data transfer rates double that of previous Seagate products in this segment. The drive offers 8.4 GB (gigabytes) of data capacity. Typically, PCs in the sub-$1,000 market have hard drive capacities below 10 GB and often below 8 GB. Seagate had previously announced a U4 model with only about half of this capacity at about 4 GB.

But Western Digital and other competitors also offer inexpensive drives with similar capacities and data rates.

In support of its strategy, Seagate cites a statement by market researcher International Data Corporation: "In 1999, 75 percent of the desktop PC and upgrade market will purchase drives with less than 10 gigabytes of capacity. Over one third of new U.S. consumer desktop systems will cost less than $1,000," Danielle Levitas, senior research analyst at IDC.

The hard drive maker is also offering a new Medalist 17242 family of drives aimed at the mainstream PC market with capacities of 17.2, 13.0, 8.4, and 4.3 GB.

Seagate is currently shipping evaluation units for PC makers. Volume production for both the U4 and Medalist 17242 families is expected to ramp up next month.