December 17, 2008 / 1:38 PM / in 11 years

UPDATE 2-Western Digital warns on revenue, will cut jobs

(Recasts, adds analysts comment, stock activity)

NEW YORK, Dec 17 (Reuters) - Western Digital Corp WDC.N said quarterly revenue would miss estimates due to weak disk- drive demand, adding that it plans to halt some operations during the holidays and cut some 5 percent of its workforce to trim costs.

Shares of the world’s second-largest maker of computer disk drives fell about 3 percent on Wednesday after it said demand for hard drives in the second quarter that will end on Dec. 26 was “significantly below” expectations.

Western Digital forecast revenue of $1.7 billion to $1.8 billion for the period. Analysts surveyed by Reuters Estimates had on average expected $1.97 billion. In October, the company had anticipated revenue of $2.03 billion to $2.15 billion.

The move comes one week after rival Seagate Technologies (STX.O) also slashed its outlook for the current quarter and said it will institute a temporary company-wide shutdown.

Analysts blamed the shortfall to weakness in the personal computer market, which like most other industries has seen demand shrink during the global economic downturn.

“Industry pricing is also significantly more competitive than forecasted,” the company added in a statement.

To cut costs, Western Digital will halt the majority of its manufacturing operations from Dec. 20 through Jan. 1, reduce worldwide headcount by about 2,500 people, and pare compensation of its executive officers, board and senior management.

The company expects to complete the moves by March and to take combined charges of $150 million in the December and March quarters as a result. It estimated savings of $150 million annually.

“We believe this realignment is the appropriate action given current difficult conditions and expect we will see Seagate mirror WD’s actions when it announces its own restructuring plan next month,” analyst Avi Cohen, head of research at Avian Securities, said in a client note.

Western Digital’s shares fell 25 cents to $12.25 on the New York Stock Exchange, while rival data storage company NetApp Inc (NTAP.O) shares fell 5.7 percent to $13.63. Seagate shares edged 4 cents higher to $4.49.

Last week NetApp said it would close a product line that experienced unexpectedly low demand, and will close a facility in Haifa, Israel, which employs 51 people. (Reporting by Franklin Paul; Editing by Lisa Von Ahn and Maureen Bavdek)

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