Read-rite Corp, the Californian manufacturer of recording heads for disk and tape drives, has become the latest in a long line of disk drive companies to issue profits warnings in recent months. The Milpitas-based company has warned that earnings for its first quarter will fall due to reduced shipments in the last two weeks of December, together with higher than predicted costs caused by the transfer to newer, magnetoresistive recording head technologies. The story has been the same from other big industry players such as Western Digital Corp, Seagate Technology Inc and Quantum Corp, who have all seen their shares collapse by 50% or more on recent warnings of poor performance. The problems stem from over supply, with many companies having excess inventory on the books which is rapidly becoming junk as the pace of change accelerates. Although demand for PCs is strong, the profit margins on disk drives has become perilously thin as the market becomes flooded. Read-rite’s shares fell a further 6% on the news.
