May 13, 2009 / 1:17 PM / 11 years ago

UPDATE 2-Seagate to cut 1,100 jobs to reduce costs

* Will trim workforce by 1,100 jobs

* Expects charges of about $72 mln

* Sees annual savings of $125 mln

* Shares fall nearly 6 percent in morning trading (Adds background, analyst comment)

NEW YORK, May 13 (Reuters) - Seagate Technology (STX.O) said on Wednesday it plans to cut about 1,100 jobs from its workforce in a move the computer storage maker expects will reduce costs by about $125 million a year.

The job-cutting move, which affects about 2.5 percent of Seagate’s workforce, is aimed at helping the company stay on track toward being cash-flow and earnings positive within its fiscal year 2010. It builds on a 10-percent reduction in jobs announced in January.

As a result of the new plan, Seagate, which competes with storage company Western Digital Corp WDC.N, expects to take restructuring charges of about $72 million, primarily in the quarter ending in June.

Analysts said Seagate needs to make additional cost cuts like this, which may help it address debt obligations.

“The move will help the company avoid tripping its net leverage ratio debt covenant that was already renegotiated earlier this year,” said J.P. Morgan analyst Mark Moskowitz, in a note to clients. “Seagate shares still face hurdles that could test investors’ resolve in the slower summer months.”

Seagate has been no stranger to restructuring in recent months as it deals with slow sales in the personal computer industry, which most others has seen demand shrink during the global economic downturn.

Back in December it said it would halt some operations during the holiday season and cut some 5 percent of its workforce. About one month ago, on the same day that it reported disappointing quarterly gross margins, it eliminated its dividend.

The elimination of the quarterly dividend is expected to trim costs by about $60 million annually, the company said.

In January it replaced Chief Executive Bill Watkins, and Chief Operating Officer David Wickersham resigned. Chairman Stephen Luczo, who relinquished the CEO role to Watkins in 2004, has returned to the position.

Shares of Seagate slipped 49 cents or 6.7 percent to $6.85 on Nasdaq late on Wednesday morning. (Reporting by Franklin Paul, editing by Dave Zimmerman and Gerald E. McCormick)

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