By Starrla Cray
HUTCHINSON, MN Net sales fell by a third for Hutchinson Technology in its second fiscal quarter, and are expected to fall even more with the loss of Seagate Technology, a customer that represented 19 percent of HTI’s net sales in the quarter ended March 29.
Seagate Technology, a hard drive manufacturer with corporate offices in Scotts Valley, CA decided to reduce its number of hard drive suspension suppliers in an effort to reduce costs.
HTI Corporate Communications Director Connie Pautz said she knew Seagate was planning to cut down on suppliers, but had hoped HTI would be a company it kept.
“Certainly, we’re disappointed with their decision,” Pautz said. The change will occur over the next 18 to 24 months, according to a press release from Hutchinson Technology.
With the current economic situation facing many companies, managing fewer suppliers can be a way to save money, Pautz said.
“It’s a very intensely competitive industry,” she said.
The impact this loss will have on employees at HTI’s Hutchinson facility is still being evaluated.
“We will certainly have more information in a few weeks,” Pautz said.
In addition to the loss of Seagate, HTI also announced a substantial loss in suspension assembly shipments, with 107 shipped in the March quarter, down from 155 million for the quarter ended Dec. 28, 2008.
For the December quarter, HTI’s net sales were $119.7 million. Lower shipments and a decline in average selling price lowered net sales to $79 million for the second fiscal quarter, which ended March 29.
Average selling price was down, due to a change in the type of product that sold. Hard drive suspension assemblies for mobile and enterprise segments declined by more than 50 percent in the second quarter, Pautz said, while shipments for the 3.5 inch ATA segment increased.
Because ATA segments tend to sell for less money, HTI’s average selling price declined from 76 cents to 71 cents. The reason for the decline in mobile and enterprise suspension sales is still being researched, Pautz said.
During the workforce reduction in January, HTI announced it is making “structural changes that consolidate certain operations, preserve cash, and lower its annualized costs by $110 million to $125 million.”
These changes are still underway, with the plant in Sioux Falls, SD scheduled to close this summer.
With the closing of the South Dakota operation, about 90 new positions were added to the Hutchinson site.
Employees from the Sioux Falls facility, as well as some workers who had been laid off from the Hutchinson plant, were hired to fill these openings.
“Many of these employees are back at work,” Pautz said.
So far in 2009, HTI stock fell from $3.48 per share Jan. 1 to $1.79 April 3.
The fiscal 2009 second quarter financial results for Hutchinson Technology, Inc. will be reported Tuesday, April 29, after the close of the market, an HTI press release stated.
A conference call for investors will take place at 4 p.m. The call will be available live and archived at www.htch.com/investors.
The webcast is also being distributed to investors by Thomson StreetEvents at www.earnings.com.