Business Tech

Seagate announced Thursday that it has initiated a restructuring plan that includes laying off approximately 1,100 employees, or 2.5 percent of the company's global workforce.

(Credit: Seagate)

According to the hard-drive maker, this reduction is required to support a targeted product development, marketing, and administrative costs of less than $300 million per quarter. In addition, it will also help position the company to be cash flow and earnings positive within its fiscal year 2010.

Seagate expects the layoffs to be completed by the end of July and result in total pretax restructuring charges of approximately $72 million. These charges, primarily incurred in the June 2009 quarter, consist mainly of cash-based employee termination costs, which are expected to be substantially paid in the September 2009 quarter.

All in all, the annual savings generated from this restructuring action is expected to be approximately $125 million.

This is the company's second round of layoffs. The first one was announced in January with about 800 people affected. Since then the company has been continuing to reduce its global headcount through attrition and restructuring, resulting in a reduction in the company's labor costs in excess of 25 percent.

Other than letting people go, Seagate has previously announced the realignment of its organizational structure to increase efficiency, including the closures of two recording media facilities and its Pittsburgh research facility, company-wide salary reductions, and other cost reduction initiatives.

Seagate's main competitor, Western Digital also laid off 2,500 employees back in December 2008, but the company reported positive earning with the net income of $50 million for for its fiscal third quarter that ended on March 27.

See the layoff scorecard for a list of tech companies that have reduced their workforce in recent months.

A few months after being ousted as chief executive of Seagate, Bill Watkins is back with a new start-up that's cooking up ways to pack high-density flash memory chips into small devices.

Bill Watkins

(Credit: Erica Ogg/CNET)

Watkins is now a board member of Vertical Circuits, which is developing a "silver ooze" intended to make already small devices, like laptops and handheld gadgets, even thinner, The New York Times reports.

Vertical Circuits' main business is working on "3D stacking," which looks to decrease the space between memory chips by stacking them on top of each other, thereby creating smaller devices. The "ooze" is a patented substance that creates electrical connections between chips, taking away the need for wires to join them. Vertical Circuits says it takes out 1.6 millimeters of space between chips.

Watkins told the Times he's amazed by how valuable that space is for some companies: "The thing that has stunned me is how much a Dell or Apple will pay for thinness...there's a big difference for them between 2 millimeters and 1 millimeter on some of this stuff."

Vertical Circuits isn't announcing which companies it has partnered with yet, and it still has yet to turn a profit. Both are coming sometime in "the next few quarters," the company says.

Seagate CEO Bill Watkins at CES 2009.

(Credit: Erica Ogg/CNET Networks)

Updated with additional information about layoffs.

Disk-drive maker Seagate Technology announced Monday that Chairman Stephen Luczo is now also serving as CEO and president of the company.

That spells the end of the tenure of Bill Watkins, who has been with the company for 12 years and has served as CEO since 2004. Seagate said that Watkins will be advising Luczo to ensure a smooth transition and that the two executives will "confer over the next week" on whether Watkins will have any continuing role at Seagate.

The company also announced that it is laying off 800 people, about 10 percent of its workforce.

At the Consumer Electronics Show last week, it was still business as usual for Watkins. In an interview with CNET News, he spoke about, among other things, the role of hard-disk drives--like those made by Seagate--in small, lightweight Netbook computers:

For us, it's a big win, since we can sell a lot of drives then. Everyone tries to low-end storage, but they can't get away with it.

Luczo, who has been with Seagate for 15 years, has been chairman since mid-2002. He also previously served as CEO, from July 1998 to July 2004, a period during which the company went private (2000) and then public again (2002).

More about the current and expected future state of Seagate should be known on January 21, when the company is set to report its fiscal second-quarter earnings.

LAS VEGAS--When Acer and Asus first started pushing Netbooks, it was all about flash memory. But now, a majority of the small, Atom-powered notebooks have hard drives. And Bill Watkins, chief executive of hard drive market leader Seagate, likes it that way.

Seagate CEO Bill Watkins at CES 2009.

(Credit: Erica Ogg/CNET)

When the two Taiwanese Netbook makers first talked with Seagate about the category, they told Watkins they didn't need storage for their tiny Atom-powered, Linux-based Netbooks since they'd be used only for surfing the Web and all data would be stored in the cloud.

Just two years later it's a totally different story. Besides more customers preferring Windows XP, Seagate says probably one in four Netbooks now have solid-state drives, and the rest are good old-fashioned mechanical drives.

"For us, it's a big win, since we can sell a lot of drives then," Watkins said in an interview here at CES. "Everyone tries to low-end storage, but they can't get away with it."

Not that he thinks the Netbook is all that great an idea for PC makers. Most of them dismiss the idea that Netbooks will cannibalize traditional notebooks, as Dell did earlier Friday at its press event. At that, Watkins scoffs. "It's a low-end notebook. And it's just chewing into the $800 notebook market," he said.

Seagate's chief is known for being rather frank in his opinions, and his take on this year's CES was no different.

Regarding the much-buzzed about Palm Pre, Watkins says the company nailed it. "It's a better iPhone. It's taking the things the iPhone doesn't do well and improving them," he said, like a physical keyboard instead of a virtual one.

And a trend he likes is pico projectors. Not for the actual gadgets themselves, but the idea that people are finding ways to get content off their devices in new ways. The form factor itself isn't ideal.

"Why would you want to carry an extra device around?" he asks. "Once they're integrated into devices, (pico projectors) will be cool. That's the next step of taking content off devices and finding different ways to enjoy it."

Seagate is here at the gadget extravaganza to push its consumer-oriented storage solutions, like the FreeAgent HD Theater device that allows media stored on an external drive to be connected by dock to both PC and TV.

Consumer storage is one of the only areas that's growing for Seagate. The PC ecosystem has been battered by the troubled global economy--the industry is expected to see negative unit growth in 2009, a first since the tech bubble burst in 2001.

As for Seagate, hard drive shipments were lower in December 2008 than September 2008, the first time ever, said Brian Dexheimer, the company's chief sales and marketing officer. But consumer storage devices like the FreeAgent drives have been the one bright spot, with sales rising 15 percent on the year.

The company, he said, is preparing for a "very conservative outlook" this year.

Updated at 3:40 p.m.with additional comments and clarifications about solid state drives and ATA commands.

Will solid-state drives thrive on Windows 7? Microsoft is set to address that question at the Windows Hardware Engineering Conference this week.

Microsoft will speak to both overall support for solid-state drives and Windows 7 support for Netbooks in Los Angeles at WinHEC 2008, which kicks off Wednesday.

In a conference abstract titled "Windows 7 Enhancements for Solid-State Drives," Microsoft states that "PC systems that have solid-state drives are shipping in increasing volumes" and that it is planning "Windows enhancements that take advantage of the latest updates to standardized command sets, such as ATA."

"Windows7 will be able to identify a SSD uniquely," according to Gregory Wong of Forward Insights. Certain ATA commands will improve the speed that solid state drives write to disk, Wong said.

ATA is most commonly associated with Serial ATA, or SATA, technology, which is the most popular data transfer standard for PC storage devices. Most new hard drives use the SATA-2 standard, and the newest solid-state drives are based on this standard also.

Until recently, solid-state drives used an older--and theoretically slower--PATA (Parallel ATA) standard. But the newest drives shipping with, for example, the Dell Latitude E4200 and HP EliteBook 2530p ultraportable laptops, use SATA-2.

"It is pretty widely held that SSDs are unlikely to meet with much acceptance until Windows undergoes significant tuning to take advantge of all the speed that SSDs have to offer," according to Jim Handy of Los Gatos, Calif.-based Objective Analysis.

Topics covered in the Microsoft SSD talk will include "file system optimizations" and "thoughts on the future of SSDs and their role in Windows," according to a prepared statement by Frank Shu, a senior program manager on the Windows Storage Platform team.

Another session, titled "Designing Flash-Based Netbooks for Windows 7," will cover how to design flash-based Netbooks using Windows 7, according to a statement by Leon Braginski, a senior lead program manager in Microsoft's PC3 team. "We will explain how to calculate the lifetime of a flash-based netbook based on specific workload numbers," a summary states.

The session will also "introduce a revised version of the Flash-Based PC Design Guide, which has been updated for Windows 7."

Other solid-state drive related talks include one by Seagate, titled "Is Your Disk Drive Going Away?" Seagate will talk about solid-state drive platforms and hybrid hard-disk drives (HDDs), among other topics.

Retail flash memory drive giant SanDisk will talk about Multi-level Cell (MLC) NAND in PCs. MLC technology allows solid-state drive suppliers to build higher-capacity drives at lower cost. The latest high-capacity 128GB solid-state drives are based on MLC.

"Analysts uniformly agree that the key challenge to solid-state drive adoption is reducing cost, and the key to reducing cost is advancing to multi-level cell technology," SanDisk said in a statement.

"The PC pushes MLC flash like no other application with its high random write rate, small block size and long life expectations. SanDisk has...introduced the first metric for SSD endurance--Long-term Data Endurance (LDE). LDE allows customers to evaluate the lifespan of an SSD in their application," SanDisk said.

Will 2009 be the year that solid-state drives take off? Maybe not. The speedy drives are catching on, but wider acceptance will take time--and the bad economy isn't helping.

Costs are still high for these drives, which typically outdo--and in some cases blow away--hard disks in performance. "2010-2011...that's when we think the price points for the SSD market get attractive enough to really drive stronger growth," Sanjay Mehrotra, president and chief operating officer of SanDisk, said this week during SanDisk's third-quarter earnings conference call.

Samsung is the leading supplier of solid-state drives.

(Credit: Samsung)

Indeed, there is still a wide price gap between hard-disk drives and solid-state drives. The difference, for example, between a 120GB hard-disk drive and 128GB solid-state drive--essentially the same capacity--on the new Apple MacBooks is $500. That's a deal-breaker for a lot of consumers. (On a Dell XPS M1530 notebook, the difference in price between a 250GB 5400rpm hard disk drive and a "Ultra Performance" 128GB solid-state drive is also $500.)

"On the mainstream notebook side we agree with SanDisk that the price points are too high and the added benefits received by customers from SSDs are just not worth the added expense," said Avi Cohen, managing partner at Avian Securities. "We expect the transition in notebooks to take a long time and will probably require Microsoft to change the OS in order to jumpstart this transition," Cohen said, citing the need for Microsoft to make Windows Vista and Windows 7 more SSD-friendly.

Eli Harari, chairman and CEO of SanDisk, believes that solid-state drives will have to wait a little longer yet for their breakthrough.

"It's still a very young market, and 2009 is not the year that it really takes off," he said during SanDisk's earnings call. In addition, solid-state drive demand will not be enough to siphon off the flash memory oversupply that is plaguing the flash memory industry, he said. "I don't believe...that 2009 inventory overhang is going to be solved through solid-state disks."

Nor does Intel--which just started shipping its first high-capacity solid-state drives this fall--see the market really taking off for a couple of years in laptops.

"I believe within in two years when the economies of scale come into play and the prices hit the right point, it will not only be in the more expensive systems but go down to mainstream (laptops)," Mooley Eden, Intel's general manager of mobile platforms, said in Taipei on Tuesday. Intel is shipping 80GB drives now and will ship a 160GB solid-state drive later this quarter.

Seagate, the largest hard-disk drive supplier, plans to enter the market in 2009 but sees "price as an inhibitor right now," according to Rich Vignes, senior manager of market development at the Scotts Valley, Calif.-based company. He also says standards work needs to get completed to make enterprise customers comfortable and "overcome endurance fears."

Beyond that, enterprise customers are showing resistance to accelerated adoption of solid-state drives as the economy worsens. "Conditions across technology are awful," said Avian Securities' Cohen. "On the enterprise SSD side, where we thought it made the most sense for the transition to occur...we have seen a slowdown in momentum for this shift as CTOs and CFOs look to conserve cash and slow new adoption programs."

The largest hard-disk drive maker is going solid-state. Slowly.

Seagate will enter the market for solid-state drives in 2009, as it slowly embraces a technology that will, in some cases, replace its bread and butter: hard disks.

"Our history is based on rotating magnetic media. But as solid-state comes online, we're embracing this new media type," said Rich Vignes, senior manager of market development at the Scotts Valley, Calif.-based company.

Seagate's first target market will be large enterprise customers. Consumer SSDs from Seagate will come later. The challenge is to convince large enterprise customers that SSDs are safe. Although hard-disk drives have endurance problems of their own, corporate customers must be convinced that a technology as new as solid-state storage is reliable.

"There isn't really a clear way of describing endurance or life expectancy of a solid-state drive. So, we're working on that as an industry standard," through JEDEC, a large standard body, Vignes said.

The presence of large players such as Seagate will allay fears, he believes. "As companies like Seagate start to demonstrate field-proven reliability and endurance in enterprise applications, we'll overcome those (solid-state drive) endurance fears."

Analysts are bullish that, with time, SSDs will catch on. "SSDs offer much better MTBFs (mean time between failures) than HDDs, although the endurance is an issue that has to be addressed," said Gregory Wong, an industry analyst at Forward Insights.

"IT managers tend to be conservative, so the qualification time will be quite long--nine months to a year, and early adopters will be Web 2.0 companies such as Google, Facebook," Wong said.

Seagate, which will enter the SSD market in 2009, says there are challenges to make SSDs palatable to large corporate customers.

(Credit: Seagate)

Seagate says it can tap into the decades of expertise it has in error correction. "Some of the skills we've picked up along the way, to deal with imperfect media, has applicability to dealing with imperfect media on NAND." All solid-state drives use NAND flash memory as the storage medium.

Fears aside, the lure of SSDs is speed--and this is what is driving Seagate into the market. "For SSDs, the play is performance, performance, performance. Did I mention performance?" Vignes said.

"SSDs have 100 times better random IOPS than HDDs," Wong said, referring to the dramatic speed advantage SSDs have over HDDs in handling input-output operations per second. Samsung has said in the past that companies such as Citibank and American Express peg server performance on IOPS.

Of course, it won't be a cakewalk for Seagate. There is plenty of competition already. Intel has started shipping SSDs for both enterprise and consumer markets. And Samsung is a leading player in the consumer market--its drives are used by Dell and Apple--and it is now stepping up efforts to snag corporate customers. On Thursday, Samsung announced that its SSDs have been selected, after extensive testing, for use in the Hewlett-Packard ProLiant blade servers.

"While for some companies, it's a new market and a new product, for us, it's an existing market, new product," Vignes said.

Seagate will get the raw material for SSDs--NAND flash memory--from others. "We're not going to make NAND. We are in discussion with all the premier NAND suppliers," Vignes said.

(Original CNET report here.)

Fujitsu is in talks to sell its hard disk drive business to Western Digital, according to a Japan-based report.

Western Digital is the second-largest hard disk drive maker in the world behind Seagate Technology. Fujitsu's HDD unit is ranked sixth.

Fujitsu would sell all of its plants--including those in Japan, Thailand, and the Philippines--for between 70 billion yen and 100 billion yen (approximately $660 million to $944 million), according to Japan's Nikkei news service.

This would be one of the largest business unit sell-offs for a Japanese electronics company, Nikkei said, adding that Fujitsu's hard disk drive business has been posting losses.

The deal would be finalized by the end of the year, according to Nikkei.

A Western Digital representative would not comment on the report.

Beyond the brutal price competition that is typical in the hard disk drive industry, there is a clear-and-present threat now from solid-state drives. Until this year relegated to digital camera and music player storage, solid-state drives are now making inroads--albeit small--in laptops, particularly ultraportables like the MacBook Air, Dell's new E4200 line, and Netbooks such as the Asus Eee PC.

Solid-state drive suppliers such Intel, Micron Technology, Samsung, and STEC are also beginning to target SSDs as replacements for hard disk drives in the enterprise.