Seagate looks to sell property to cut costs

Disk drive maker Seagate, hit by a market slowdown, is looking to sell then lease back property in California and Colorado.

The company’s revenues were down 35 percent on an annual basis to $2.04 billion in its latest quarter ended September 30, with a $29 million profit, 94 percent lower than the year-ago $526 million. It said it would make fewer disk drives, cut annual capital expenditure plans, and layoff staff to deliver cost savings of up to $95 million.

Dave Mosley, Seagate
Dave Mosley

CEO Dave Mosley told analysts during the results earnings call: “In addition to adjusting our production output, to drive supply discipline and pricing stability, we are implementing a restructuring plan to sustainably lower costs, including a reduction in our global workforce.”

The San Francisco Business Times reports that Seagate wishes to sell its 31-acre, 575,000 sq ft research facility at Kato Road in Fremont, California, for $300 million and then lease the buildings for a seven-year term.

Seagate bought the property for $90.3 million in 2013.

It is aiming to operate a similar sale-and-lease-back deal for its 40.5-acre, 400,000 sq ft facility at 389 Disc Drive, Longmont, Colorado. It runs a design center at the Longmont facility, developing a Lyve Reference Architecture, for example, and bought the facility in 1999.

As Mosley said, Seagate’s restructuring plan also includes reducing its headcount by 8 percent, around 3,000 jobs. 

Workers at Seagate’s plant in Derry, Northern Ireland, are concerned that they will be targeted in the layoff exercise. The plant makes disk drive read/write heads. If fewer disk drives are being made, fewer read/wrote heads will be needed. 

Mosley said in the earnings call: “We currently expect customer inventory drawdowns will remain a factor through at least the December quarter. We reacted quickly to adjust our production levels to the current demand environment and our gross margin performance reflects the resulting factory underutilization costs that increased markedly through the month of September.

“We continued to respond to the changing market conditions and further reduced production output across all product lines with the exception of our 20-plus terabyte products, where demand has held firm and pricing relatively stable.”

As reported in the Belfast Telegraph, Foyle constituency councillor Shaun Harkin said: “Seagate has made tremendous profits in recent years. This is reflected in its shareholder payouts and big pay increases for top management. It still remains profitable but has seen a slowdown. However, this slowdown was expected and the company’s own financial projections are very upbeat. We need to do everything we can to ensure workers in Derry and the North West are protected.”

Several hundred Seagate staff in Derry were disappointed with a recent pay award. According to Derry Now, Harkin said: “Workers were also disappointed at their pay award this year, which led to 400 members of staff signing a petition calling for a decent pay increase as we face into a ‘cost of living’ crisis.”