Comment Seagate has announced its latest quarterly results will be unexpectedly good but there will be employee bloodshed. Another 6,500 layoffs on top of the 1,600 announced in June will take place.
WDC did say it was cutting 507 US staff in June but these are the tip of an expected iceberg, which will see thousands of positions eliminated.
There are two major disk drive market problems which impinge on manufacturing capacity; PCs and SSDs, with SSD (flash storage) affecting PCs as well as data centres.
The world's consumers and, to some extent, businesses, are buying fewer PCs and notebooks as smartphones and tablets become their computing choices, and these use flash storage (SSDs or flash cards). Within the PC market there is a transition to using SSDs instead of disks because disks are slow, and that further decreases demand for disks inside PCs and notebooks.
Data centres switched to using 2.5-inch disk drives from 3.5-inch disks, because disks are slow and more spindles meant more speed. But affordable SSDs solved the disk speed problem and are killing demand for high-performance disk drives. The 15,000 rpm market can see its own demise coming and the 10,000rpm disk market is going the same way.
Seagate has concluded that it has substantial excess disk drive manufacturing capacity and is taking steps to reduce it. There is a plan for consolidation of its global footprint across Asia, EMEA and the Americas, with the 8,100 job losses, an approximate 17 per cent cull of its workforce, being a consequence.
How can WDC escape this contagion? We don't believe it can.
Here is a chart showing the rise and fall of Seagate's shipped disk drives by quarter.
Click to expand...
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