Hard drive manufacturer Seagate announced its intention to cut about 3 thousand employees - 7.5% of the entire staff. Earlier, the US Department of Commerce accused the company of violating export control rules, suspecting Seagate of supplying Chinese products to Huawei, which is under US sanctions. Since the beginning of trading on the New York Stock Exchange, Seagate shares have fallen in price by 10%.
Global economic uncertainty and wide-ranging consumer inventory adjustments worsened in the past quarter, impacting near-term industry demand and Seagate's financials, CEO Dave Mosley said. He added that the manufacturer has responded to current market conditions and improved long-term profitability - the company has adjusted the volume of production and annual plans for capital expenditures.
Seagate denies allegations of supplying Huawei, which the administration of US President Joe Biden has called a threat to the national security of the United States. The company emphasized that it did not participate in prohibited activities, which is confirmed by the US Bureau of Industry and Security. In addition, Seagate reminded that hard drives are not subject to export control rules.
Seagate's sales for the last fiscal quarter totaled $2.04 billion, analysts predicted that they would reach $2.12 billion. The company expects revenue for the current quarter to be $1.85 billion, which will be the lowest since 2005.
A number of companies in the field of computer components have already warned investors about a decrease in demand for products. Companies and government agencies are slowing down investment in these companies, resulting in an accumulation of unused components. Coronavirus restrictions and economic problems in China have impacted demand for high-capacity drives, and inflation has reduced costs, Seagate said.
A 7.5% cut in staff will save the company about $110 million in the third quarter of 2023, Mosley said. Seagate plans to cut costs by $10 million this quarter, chief financial officer Gianluca Romano said.