Seagate to Lay Off Over 8,000 to Lower Costs
by Anton Shilov on July 14, 2016 7:30 AM EST
It is not a secret that total available market of hard drives significantly shrank in the recent years due to the slowing sales of PCs and popularization of SSDs for most low-end capacity devices. In a bid to stay profitable, leading hard drive makers attempt to lower their costs by optimizing product roadmaps, reducing production capacities and reducing overhead. In the recent weeks. Seagate has announced plans to cut its headcount by over 8,000 people within the next 12 months.
Seagate announced its first restructuring plan in late June, under which it plans to lay off 1,600 people worldwide, or about 3% of the company’s workforce. The decision will affect all geographies and organizations equally for the most part, Seagate indicated. The company said that the implementation of this plan would cause pretax charges of $62 million (recorded in the fiscal fourth quarter of 2016), but will help the company to save approximately $100 million on an annual run rate basis in the fiscal year 2017.
The second restructuring plan announced this week seems to be considerably more drastic than the first one. Seagate intends to reduce its workforce in Americas, Asia and EMEA by approximately 6,500 people, or 14% of its global headcount by the end of its fiscal year 2017. As a result, Seagate will lay off about 8,100 of its employees within the next 12 months in total. The move will cost the company $164 million, but is expected to significantly lower the manufacturer’s expenditures going forward.
While the measures to cut down the headcount seem rather significant, it looks like Seagate has not revealed all of its restructuring initiatives just yet. During its latest conference call in April, Seagate announced plans to reduce its manufacturing capacities from around 55 million to 60 million drives per quarter to approximately 35 million to 40 million drives per quarter. The decline in personnel it seems is only a part of the plan to cut down expenses and manufacturing capacities.
So far the company did not elaborate on its intentions regarding the reduction of manufacturing capacities, but this will likely happen in the coming weeks as Seagate decides to proceed with the plan. At present, it is unknown whether the move might trigger additional overhead optimizations, but this is a possibility.
In the Q4 of its fiscal 2016 (which is calendar Q2 2016) Seagate sold approximately 37 million HDDs, down from around 45.2 million in the same period a year ago, and earned about $2.65 billion in revenue, the company said in its statement. Seagate’s gross margin during the quarter was 25%, but the hard drive maker expects its margins to increase to 27-32% by late December thanks to its lower costs and increased sales of enterprise-class HDDs. Given the current sales of hard drives, Seagate might indeed need to reduce its production capacities since the company could produce significantly more drives that it could sell.
Source: Seagate
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Samus - Friday, July 15, 2016 - link
How will Joe and Jenny's edit their amateur videos with less than 240GB!?Samus - Friday, July 15, 2016 - link
Seagate is the Chrysler of hard drives, without the long warranty. Would you buy a Chrysler with a 12 month warranty?HomeworldFound - Thursday, July 14, 2016 - link
Are they even making money on consumer products?DanNeely - Thursday, July 14, 2016 - link
According to articles Anton's written about the HDD market, low end consumer drives do return a very small return above manufacturing costs.But it's the expensive max capacity and enterprise models that generate the large marginal profits needed to fund R&D; which's why the slump in $50 laptop sales looks a lot worse from sales volume numbers than it is from a profitability/R&D impact perspective. OTOH when SSDs manage to gut the 10/15k SAS market; that will hurt their ability to sustain R&D a lot more. (And with Seagate thinking its next 15k generation might be the last at that speed the beginning of the end might be near.)
JoeyJoJo123 - Thursday, July 14, 2016 - link
IT'S OGRE. HDDS ARE DEAD. SSDS WON.JUST GIVE IT UP.
Sushisamurai - Thursday, July 14, 2016 - link
I'm surprised there's not a lot of coverage to those SSD/HDD hybrids. Did they not catch on and die off or have they not improved significantly?HomeworldFound - Thursday, July 14, 2016 - link
No real improvement unfortunately. There's just not a scenario where it makes sense. If the SSD side were bigger and you could choose what you wanted to store on there, it might work.DanNeely - Thursday, July 14, 2016 - link
They've more or less withered and died. The original models were things like 4/256GB. The 4GB of flash was too small to be useful for much beyond a write cache; and even there the simplistic write tens of gigabytes of data testing that was common at the time meant that it wasn't benchmark visible. At the time a 32/64GB flash 500gb laptop HDD (or 2/4TB desktop HDD) combo might've offered enough flash to hit the sweet spot if coupled with software/drivers smart enough to cache OS/Application binaries and frequently accessed user data on flash while archiving apps that haven't been used for months and media to the HDD part. Only Apple actually delivered a hybrid drive with that sort of resource mix; never having used one I can't comment on how well their software delivered.Now the problem for relevancy is that an SSD big enough to be suitable for most users is about the same cost or cheaper than a smaller but still useful SSD and a small laptop HDD. The only groups who still might need something like that would be gamers on a budget and people with large media collections they don't want to offload to a NAS. The problems there are both that those are relatively small groups of users, and that they're also the users least likely to find having to manage multiple drives a serious burden.
frenchy_2001 - Thursday, July 14, 2016 - link
Intel has offered ways to pair SSD/HDD in that way, with up to 64GB of SSD caching most used data automatically in your HDD. I've been using this solution for years (this came our of the z68 chipset, core i 2xxx generation). This works ridiculously well with only 32GB for the cache.So, a 1 or 2TB HDD with such a cache (32/64GB) would be excellent, however, no manufacturer has offered such product, limiting themselves to 4/8GB flash, which is insufficient.
DanNeely - Thursday, July 14, 2016 - link
With no major OEM support that was never more than an enthusiast gimmick; and even at the time capping it at 64gb was a major limit. At that time the i7-2600 launched I already owned a 120GB drive; not being able to use all of my expensive purchase meant that even if I'd upgraded to a newer CPU I wouldn't've taken advantage of it. (And minimizing the hassle of multiple drives meant I bought a $370 240GB SSD about 18 mo after paying $300 for 128GB; and spent $500 on a 1 TB one two years ago so I could go pure flash in my desktop.) If I could've hybridized a larger SSD with an HDD into a single volume I'd've probably jumped on the opportunity to do so.