July 21, 1998 1:30 PM PDT

Seagate asks CEO to resign

In a surprise move, Seagate Technology today announced that it is pushing out its chief executive, Alan Shugart, a pioneer in the invention of the computer disk drive, and replacing him with Stephen Luczo, the company's president.

"The board requested Mr. Shugart's retirement from the company, citing that the time had come to make a change in the leadership of the company," Seagate said in a statement.

Seagate, the world's biggest disk drive manufacturer, said it asked Shugart, one of its founders, to retire so that the company can concentrate on turning around its fortunes after a difficult year.

"During the last several quarters, Seagate has undertaken a variety of actions in order to improve the company's competitive position," Luczo said in a statement. "We believe that as we implement these changes the company's long-term competitive position will continue to improve."

Falling prices, slower computer sales and excess worldwide capacity held back disk drive makers over the last year. Seagate reported a loss for its fiscal year ending on July 3, of $530 million, reversing the year-earlier profit of $658 million.

"It has been a tough year. The board is encouraged by the momentum that is starting to build with the company, which was reflected in last quarter's results," said Seagate board director and newly named cochairman Larry Perlman. "But we needed to accelerate this pace of change and are confident that Steve has this sense of urgency and recognizes the enormous potential of Seagate.

Shugart, who began his career with IBM and joined Seagate in 1979, has been grooming Luczo, who joined Seagate in October 1993. The time was right for Shugart to leave with the end of the fiscal year, a Seagate spokeswoman said.

Shugart told reporters he was surprised at the board's action.

Shugart was part of the IBM team that pioneered the original Winchester disk drive in the late 1960s. He left IBM in the early 1970s to found a succession of disk drive companies to exploit that development and has led the industry through boom and bust.

Luczo, who also holds the title of chief operating officer at Seagate, has been responsible for the company's disk drive and component operations since 1997. Today he joined the company's board of directors, Seagate announced. Current board directors Gary Filer and Perlman were named as nonexecutive cochairmen.

Luczo said he does not plan to change the fundamental strategy of the company. His goals include increasing Seagate's speed in delivering products to market and ramping up the company's research and development efforts, he said during a conference call this morning.

In targeting areas in which the company needs to improve, Luczo pointed to Seagate's disk drive business for desktop computers, saying that he wants to increase time to market in that area.

"My expectation in the next two to 12 weeks is I will make some adjustments to the organization to reflect my expanded duties and achieve objectives that we have pursued for the last two to three quarters," Luczo said.

Seagate currently is gearing up to ship its 3.2 gigabyte drives by mid-August. Luczo said the company is likely to trail its competitors in bringing that product, as well as its next-generation drive, to market. He noted, however, that he believes the lag time will decrease over the next two generations so that the company's 5 gigabyte drive will be first to market.

The company also said today that it may take a charge in the current quarter to cover the cost of Shugart's severance package. No details were available on the specifics of that package.

"While we are saddened that Al will no longer be associated with the company," Perlman said, "we are confident that the best lies ahead."

Reuters contributed to this report.

 

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