Maxtor blamed its pending acquisition by Seagate for the challenges is has faced for the first quarter ended April 1, which was so bad that its per share loss was more than double analyst estimates.
This lower-than-expected unit growth, combined with marginal merger-related market share losses, placed increased pressure on the company’s already burdened cost structure and constrained Maxtor’s ability to compete, especially on the low-end of the desktop drive market, the company said. It also said plans for some component cost improvements were not realized.
Last December Seagate announced it would pay $1.9bn in stock to acquire Milpitas, California-based Maxtor in a deal that would create a company with 40% to 45% of the hard drive market, and combined annual revenue of more than $11bn.
However, Maxtor is now saying that because of the decrease in volume, it significantly reduced its production schedule in the first quarter. Accordingly, it will cut approximately 900 positions at its Singapore manufacturing facility over the next few weeks. This will result in an approximately $6m reserve in the first quarter for severance-related expenses.
Maxtor now expects to report a net loss of between $100m and $104m for the first quarter of 2006, a loss $0.39 to $0.40 cent per share, on revenue between $875m and $885m. In late January it had forecast a loss of $0.17 to $0.21 cents per share, and revenue of $950m to $975m.
The company is working through its normal close process and expects to announce its first quarter 2006 financial results on April 26. However, it will not hold an investor conference call and will not provide any more guidance for any future quarters.
Maxtor said it expects its acquisition by Seagate to close in May.
