Maxtor Cuts Targets, Jobs

The hard-drive maker says sales likely will be 10% under Wall Street consensus.
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Updated from 5:04 p.m. EDT

Soon-to-be-acquired

Maxtor

(MXO)

warned Wall Street that it will miss its first-quarter financial targets by a lot more than the proverbial mile and said it will cut 900 jobs in Singapore.

The ugly meltdown, which includes a per-share loss that's more than double analysts' estimates, is the result of slow sales and customer defections brought on by the company's pending acquisition by

Seagate Technology

(STX) - Get Report

, Maxtor said in a statement released after Tuesday's close.

The news knocked shares of Maxtor down 28 cents, or 2.8%, to $9.80 in recent after-hours trading. Shares of Seagate were off 69 cents, or 2.5%, to $27.

The hard-drive maker now expects a first-quarter loss of $100 million to $104 million, or 39 cents to 40 cents a share, compared with the First Call consensus of a loss of 18 cents.

Sales will likely range from $875 million to $885 million, as much as 10% under Wall Street's target of $964.6 million.

The company explained the loss by saying that unit volume growth was less than expected in the quarter, largely because of the acquisition, and that the company experienced "marginal merger-related market share losses."

The two factors strained Maxtor's "already burdened cost structure and constrained Maxtor's ability to compete, especially on the low-end of the desktop drive market," the company said.

Maxtor will cut some 900 jobs in its Singapore manufacturing facility and will take a $6 million reserve in the first quarter to pay for severance-related expenses.

The company said that business conditions in the quarter were seasonally normal.

Seagate, the No. 1 hard-drive maker,

announced its intent to buy Maxtor, the No. 2 drive maker on Dec. 21, in a stock deal valued at $1.9 billion at the time.

Maxtor will announce final first-quarter results on April 26 but will not hold an analyst call or provide guidance for the second quarter, the company said.

The merger is now expected to close in May, rather than late June or early July, Seagate said in a filing with the

Securities and Exchange Commission

. The earlier close should help minimize erosion of Maxtor's share value in front of the transaction and accelerate the migration of the company's products to Seagate's portfolio, Goldman Sachs analyst Laura Conigliaro said in a note to clients.

"While Seagate investors will have to live with some turbulence over the next few months due to the Maxtor integration and seasonality, the timeframe for uncertainty has probably been shortened. Using the current multiple against existing forward-year earnings (including employee stock option expense) yields a $29 stock price which should move higher as post-acquisition accretion begins to be factored in," she wrote.