Trouble in store for disk vendor

Shares slide as Western Digital's losses promise to be even bigger than expected. Simon Robinson reports.

Troubled US hard disk manufacturer Western Digital expects itsgger than expected. Simon Robinson reports. fourth-quarter losses to be more than double Wall Street expectations, blaming weak prices and slack demand.

The Irvine, California-based company, which had originally anticipated losses of between $40 million and $59 million, now expects the deficit for the fourth quarter ending 27 June to exceed $100 million.

To make matters worse, the announcement was likely to land the company in trouble with its bankers. The company said it was in talks with its creditors over the renegotiation of a $250 million line of credit, of which $50 million is already outstanding.

In a statement, Chuck Haggerty, Western Digital's chairman, president and CEO, said that despite inventory reductions in the previous quarter, 'there remain too many drives in the distribution channel'.

Western Digital has reduced production substantially over the last few quarters and this month closed its Santa Clara media facility. In a further attempt to cut costs, the company will implement a shorter working week at its manufacturing plants in Malaysia and Singapore. It said by the end of June, the workforce will have been cut by 22 per cent since November 1997, to 13,000 employees.

Analysts had predicted per-share losses of between 45 cents and 67 cents for the quarter on revenues in the range of $830 million to $864 million.

The announcement was made after the market closed, but in after-hours trading, Western Digital's stock price immediately slid by 20 per cent to $12.50. On 11 June, its shares were hovering at just over the $11 mark.