Komag Inc, the San Jose, California supplier of thin film disks for computer disk drives, says it sees no relief from the over supply problems plaguing the disk drive industry, forcing it to lay off 480 people and to write down the value of its production facilities by $185m. The subsequent charge will hit Komag’s second quarter, which is already looking like a disaster area. Second quarter net sales are now only expected to reach $75m, a full $100m lower than the second quarter of 1997, and total losses are now predicted to reach $240m including charges, more than Komag’s combined net income for the last five years. Komag also said it would be closing its San Jose-based plant in on- going cost cuts, leaving it with production facilities based predominantly in Southeast Asia which enjoy cost and tax advantages. Stephen Johnson, Komag’s chief executive officer, said that a drop in demand from Komag’s big disk drive manufacturing customers leads him to believe that the industry’s problems will stretch on into 1999. Things have been going badly wrong at Komag since the middle of last year when the company invested heavily in expanding its production capabilities, only to be caught out by a market down turn and a worldwide over supply problem. Reacting to this latest warning, Komag’s shares fell 13% to $8.0.
