Seagate Technology is cutting thousands of jobs and slashing executive salaries by as much as 25%, as the disk-drive maker grapples with the economic downturn that has hammered sales of personal computers that use the company's products.
In a Wednesday filing with the Securities and Exchange Commission, the company said it would reduce the number of employees worldwide by 6%, or about 2,950 people. This number includes the 10% reduction in the U.S. workforce, or 800 workers, that the company announced earlier this week.
Seagate said it would slash the salary of its executive officers, including the CEO and executive VPs, by 25%. The company this week announced a management shakeup in which it replaced CEO William Watkins with chairman Stephen Luczo, who served as CEO for six years before Watkins. During his first tenure, Luczo oversaw a dramatic downsizing.
The company said it would cut the salaries of senior VPs by 20%; VPs, 15%; and management, sales, supervisors, and professional employees, 10%. The salary reductions are expected to take effect in February.
The estimated savings from these cuts is expected to amount to $80 million annually, Seagate said. The job cuts, which are set to be mostly completed by the end of March, are expected to reduce costs by $130 million annually. The company said it would take a $90 million charge to pay for severance and other expenses related to the job reduction.
The Seagate board approved the layoffs and other cuts Jan. 11, according to the filing.
Seagate has warned that its latest quarterly results won't meet Wall Street expectations. The company in December lowered its fiscal second-quarter revenue guidance by $500 million. The company is scheduled to report earnings Jan. 21.
Seagate is the latest tech company to be hit hard by the economic slowdown that has had a big impact on PC sales. Global PC shipments in the fourth quarter of last year were less than the same period a year ago, the first year-to-year drop in six years, IDC reported Wednesday.
Seagate, however, has some responsibility for its current financial problems. The company was late in developing some drives to take advantage of the market shift from desktop PCs to laptops, according to The Wall Street Journal. In addition, the company suffered from excess manufacturing capacity.