Updated from 7:59 a.m. EDT

Maxtor ( MXO) shares fell Friday after the company warned second-quarter results will miss estimates because of a 10% shipment shortfall.

The maker of IT storage products said after the bell Thursday that it now expects to lose $20 million to $30 million, or 8 cents to 12 cents a share, including a gain of about $25 million from a lawsuit settlement.

Excluding the gain, Maxtor said it will lose between $40 million and $50 million, or about 16 cents to 20 cents a share Before the gain, analysts had expected the company to lose 7 cents a share.

The stock was recently down 42 cents, or 6.5%, to $6.05. Rival Western Digital ( WDC) fell 18 cents, or 2.1%, to $8.40. Seagate ( STX), supported by an analyst's upgrade, was down a penny to $14.24.

Maxtor also expects second-quarter revenue of $820 million to $825 million -- below current estimates of $953.8 million.

"We are extremely disappointed in our second quarter performance, which was the result of a very aggressive pricing environment in both the OEM and distribution channels and lower than expected unit shipments, primarily to distributors," said Paul Tufano, president and chief executive. "During the quarter, we took steps to control costs and expenses to partially offset the shortfall in volume and revenue."

In order to cut costs further and lower its break-even point, Maxtor plans to eliminate about 400 to 500 positions. The reduction will result in lower costs and associated expenses of about $60 million to $80 million a year. These actions will begin in the third quarter with the majority completed by year- end.

Shipments in the second quarter were about 10% below initial guidance expectations. This shortfall reflected the seasonally weak second quarter, the company said, coupled with softness in the distribution channel, as white box manufacturers and system integrators delayed purchases in anticipation of declining prices. During the quarter, the price gap between OEM and distribution customers narrowed more than expected, especially in the latter part of June.

As a result of greater-than-expected price declines, the average selling price in the second quarter is anticipated to be about $71 -- a $4 decline from the first quarter and significantly below the guidance assumptions. The combined effect of lower-than-expected volume and pricing accounted for the entirety of the guidance miss.