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Western Digital Cuts 2,500 Jobs, Scales Back Operations

Weak demand for hard drives is expected to continue into next year, the company says

Western Digital Corp. (NYSE: WDC), the world second-largest maker of hard drives, says demand for its products has weakened significantly and that its revenue for the second quarter ending Dec. 26 will be below expectations. As a result, the company says it will lay off 2,500 workers, or 5 percent of its workforce, cut executive pay, and shut down some of its factories during the holidays.

The news comes a week after competitor Seagate Technology Inc. (NYSE: STX) announced that its revenues for the current quarter would be below expectations and that it would shut down its U.S. facilities from Dec. 22 until after New Year's Day in a cost-cutting move. Seagate said it expects revenues of $2.3 billion to $2.6 billion for its second quarter ending Jan. 2. The company had previously predicted revenues for the quarter to hit around $3.05 billion. Analysts had been predicting $2.9 billion.

Western Digital has forecast revenues of $1.7 billion to $1.8 billion for the current quarter. Analysts surveyed by Reuters Estimates had on average expected $1.97 billion. In October, the company had anticipated revenues of $2.03 billion to $2.15 billion.

The company said in a statement that industry pricing is significantly more competitive than previously forecast, contributing to the declines.

"In the current macro economic climate, we expect demand weakness to last well into the middle of the 2009 calendar year," said president and chief executive officer John Coyne. "Consequently, we are taking additional steps to immediately reduce production capacity and operating expenses on a longer-term basis across our entire business as we approach the seasonally weaker second half of our fiscal year."

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