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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metayoshi - Thursday, July 14, 2016 - link
It actually has nothing to do with performance as for most users (people who don't read this site). Any of the most recent 8 GB NAND based SSHDs are actually good enough for most people's usage. What actually killed it off was the price to OEMs, which is really where client storage thrives. OEMs do not want to spend that extra money on the SSHD, especially when they see the average joe buying either their lowest end products which are cheap and have HDDs, or the higher end products including macbooks (SSD only now) and "Ultrabooks" and gaming PCs (pretty much becoming SSD only) where they have the budget for an SSD. The SSHD market hits a very very small market, which is even a niche in itself within the enthusiast group, since most of us would just have an SSD OS drive and HDD secondary drive. And the client PC market has been shrinking for a while now, so an already tiny market becomes even smaller.Morawka - Thursday, July 14, 2016 - link
the problem for seagate is not entirely SSD, Seagate didnt' R&D and up capacity of their HDD lineup enough.. They added 2TB every 4 years. If they can get capacity up to like 16TB-32TB per drive with new materials, and technology, then HDD's will make a return to the market.romrunning - Thursday, July 14, 2016 - link
I don't think we'll ever see 16-32TB in a spinning disk. In a SSD - definitely we'll see it. They don't even fill a 2.5" frame completely now, so the extra space can be filled with more multi-layer memory chips to create some multi-TB behemoths. Hey, maybe they'll even create a 3.5" body for fitting in more chips on the board.Of course, they'll also need a controller to handle all of that addressable space, but I'm sure that's a hurdle that will be overcome.
Lolimaster - Thursday, July 14, 2016 - link
1st gen HAMR was supposed to bring 15-30TB by 2018 (if released in 2015). And options up to 100TB by 2025.Lolimaster - Thursday, July 14, 2016 - link
Once you increase the density of HDDs with new tech is pretty easy to hit tens of TB's on them. From non PMR to PMR drive the density increase by near 10x. HAMR is/was that next stepping stone. Then we would have next gen HAMR for the 1st petabyte class drive.SSD's will be expensive as multiterabyte storage for a long time.
Nagorak - Tuesday, July 19, 2016 - link
The thing is, hardly anyone needs that much space. Hard drive capacity has far outstripped the demands of most users, and SSDs are quickly catching up. Just having massive drives may help them in the data center, but it won't make that much difference among end users. For the vast majority of people a 3 TB drive or a 300 TB drive are equally excessive.Lolimaster - Thursday, July 14, 2016 - link
Before the flood gate you could buy a 2TB drive for like 70 bucks. Now it's even more expensive.4 WD Blue 6TB for my personal data center.
Communism - Friday, July 15, 2016 - link
You can get data-center pull Hitachi 2TB drives that are rock-solid for 50 USD or less (usually less).The problem with the lack of price lowering is that (well made) hard-drives, unlike SSDs, don't actually die linearly (SSDs have a very finite lifespan for reliable use), meaning that the massive amount of hard drives that were deployed at data-centers flood the market after the ~3 year replacement cycle.
This makes it very hard to keep selling more hard drives as well made/designed hard drives can last up to 10+ years fairly consistently.
Communism - Friday, July 15, 2016 - link
Here is one for 30 USDhttp://www.ebay.com/itm/Hitachi-Ultrastar-7K3000-H...
And with 14,736 sold from just this one listing, you can see the scale of this problem for manufacturers.
svan1971 - Friday, July 15, 2016 - link
No bi deal they can join the 94 million not working in this wonderful economy, in no time their jobs will be filled with people from india and mexico at 1/3 the wages.