Seagate Shakes Up Executive Lineup, Plans To Cut 10 Percent Of U.S. Jobs

Seagate on Monday said William Watkins is resigning as CEO and that David Wickersham is resigning as president and CEO, with company Chairman Stephen Luczo taking over the CEO and president positions.

Watkins, who has served as Seagate CEO since 2004, is still with Seagate and working with Luczo to ensure a smooth transition, a Seagate spokesperson said. The two are also in discussions to determine what role, if any, Watkins will have at Seagate going forward, the spokesperson said.

Luczo has been chairman of Seagate since 2002, and was CEO of Seagate from 1998 to 2004. During that time, Luczo led Seagate's move to become a private company in 2000 and its return to its status as a public company in 2002.

The Seagate spokesperson declined to discuss why the board of directors wanted the change in leadership.

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Wickersham's position as president and CEO is being split between two Seagate executives in the wake of his departure. Luczo is assuming the position of president, while Robert Whitmore, Seagate's executive vice president and CTO, will assume the responsibilities of COO, the spokesperson said.

Seagate also plans to reduce about 10 percent of its U.S. workforce. The layoffs are a part of a plan expected to be unveiled later this month after the affected employees have been notified. Seagate said it expects the restructuring to impact a broad range of departments, including research and development, and is being done in response to the current economic environment.

Jayson Noland, an analyst with Robert W. Baird & Company, a Milwaukee-based financial analyst firm, wrote in a research report on Monday that his company believes Seagate's gross margins will be 17 percent or less in 2009, compared to about 26 percent in 2008, and that the March and June quarters are Seagate's weakest seasonal periods.

Seagate is in a very competitive hard drive market, and the company has been experiencing "drastic" pricing pressure to move products, Noland wrote. The company stumbled in terms of its mobile drive business in fiscal year 2008, a move which negatively impacted market share, revenue growth and margins, and pushed it six to nine months behind its competitors in this market, he wrote.

"Given the circumstances, the leadership change is not completely surprising," Noland wrote.

Seagate in October reported revenue of $3.0 billion for its first quarter of fiscal year 2009, down about 10 percent from the $3.3 billion it reported during the same quarter of 2008. Income for that quarter hit only $60 million, down a dramatic 83 percent compared to the $355 million it reported for the first quarter of 2008.

Seagate plans to detail the change in leadership and the restructuring on January 21 when it hosts its quarterly earnings report.