Maxtor Boosts Revenue Forecast
Hard-pressed
Maxtor
(MXO)
upped its revenue forecast for the first quarter and said that pro forma gross margins -- a critical area for the company -- are improving.
The hard-drive maker now expects revenue in the quarter to range from $975 million to $1 billion, compared with its earlier estimate of $950 million to $980 million, the company said during a midquarter conference call Friday.
Analysts polled by Thomson First Call were expecting $968 million.
Earlier in the day, Maxtor said in a
Securities and Exchange Commission
filing that it would cut as many as 5,500 jobs at its Singapore facility, part of its plan to control costs by moving production to China. Costs of the move -- $12 million in the first quarter -- will contribute to an expected first-quarter loss of 14 cents to 16 cents a share; previously, the company told investors to expect a loss of 12 cents to 16 cents a share.
About half of the jobs lost in Singapore will be eliminated through attrition, the company said. It will close one of its two Singapore plants by the first quarter of 2006. Maxtor also will spend about $6 million in retention bonuses.
Including the severance charges, gross margin will likely be 9%, compared with the earlier estimate of between 9.2% and 9.8%. But analyst Brian Alger of Pacific Growth Equities said that without the charges, the company's gross margin would be 10.2%, compared with 8.1% in its recent fourth quarter.
Also impressive, Alger said, was the company's forecast of a 25% sequential uptick in sales of higher-priced drives for businesses. Alger did note that the increase is off a small base, and the overall enterprise business is still a relatively small contributor to revenue. (Pacific Crest doesn't have an investment banking relationship with Maxtor.)
Maxtor, which is not as vertically integrated as its major competitors, has been under significant pressure to cut costs and raise margins.
Western Digital
(WDC) - Get Report
, for example, posted margins of 15.7% in the December quarter, nearly twice that of Maxtor.
Much of Maxtor's executive team, including the CEO and CFO, was replaced last year, and the new leadership has promised to make significant progress on the turnaround in the first half of 2005.