Disk drive vendor Seagate Technology has become the latest vendor to issue a profit warning after the company revealed that there was weak demand for its high-end storage products.
The profit warning comes just one week after chip giant Intel issued a warning, blaming the slow demand for microprocessors, particularly in Europe, for its forecast that sales will be 10 per cent lower than anticipated (PC Dealer, 4 June).
Seagate warned last week that encroaching competition from IBM, Western Digital and Quantum, meant revenues for the quarter ended 27 June will fall between six per cent and 10 per cent below the $2.5 billion achieved in the previous quarter. Net income ? before exceptional items including a one-off litigation charge of $94.1 million relating to a court case with Amstrad ? will also fall short of last quarter?s income.
The profit warning hit Seagate?s shares as they fell by more than three cents on the Stock Exchange. The manufacturer?s board of directors has approved the repurchase of $600 million of stock.
Seamus Twohig, head of storage at Seagate distributor Ideal Hardware, said: ?I don?t think it?s a great surprise. We?ve been having a hard time lately, what with the leap from 4Gb to 9Gb drives, which is a leap and a half, and the fragmentation of the market where IBM and Quantum are now appearing.?
He added that the slow take-up of the 9Gb drive in the market had affected profits.
Twohig said that vendors and distributors need to work harder in educating their customers about the benefits of high-end drives.
J Seagate has announced plans to double the size of its Londonderry wafer plant with a #149 million investment, which will create up to 1,125 jobs over the next five years.
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