Seagate Announced Restructuring Plan To Further Reduce Operating Costs
Seagate Technology announced it has initiated a restructuring plan that includes a reduction of approximately 1,100 employees or 2.5% of the company’s global workforce. This reduction is required to support a targeted run rate of product development and marketing and administrative costs of less than $300 million per quarter and to position the company to be cash flow and earnings positive within its fiscal year 2010.
The restructuring plan, which the company expects to be largely complete by the end of July 2009, is expected to result in total pretax restructuring charges of approximately $72 million. These charges will primarily be incurred in the June 2009 quarter and consist mainly of cash based employee termination costs which are expected to be substantially paid in the September 2009 quarter. The annual savings generated from this restructuring action is expected to be approximately $125 million.
Since the beginning of fiscal year 2009, and including today’s announcement, the company has reduced its global headcount through attrition and restructuring, resulting in a reduction in the company’s labor costs in excess of 25%. In addition, Seagate previously announced the realignment of its organizational structure to increase efficiency, as well as the closures of two recording media facilities and its Pittsburgh research facility, company-wide salary reductions announced in January 2009, and other cost reduction initiatives. Seagate continues to assess options to further reduce manufacturing operating costs.