StorageTek has announced that it expects to post a fourth quarter loss, is about to cut up to 600 jobs as part of a restructuring effort, and that its chief executive is stepping down.
The storage supplier said that it anticipates posting a loss from operations of about $0.10 cents per share, excluding restructuring, litigation and other one time charges, compared with the First Call analysts' consensus estimate of earnings of $0.05 per share.
The profits warning follows several quarters that came in below analysts' expectations due to the effects of purchasing delays before the firm introduced new products, and the end of an alliance with IBM, which is now a competitor.
Storagetek explained in a statement: "The company's fourth quarter results were affected by a number of factors, including lower margins on consulting and integration service revenue, the impact of the Year 2000 lockdown within the customer base, normal end of year sales, bonus and commission expense increases, and operating expenses associated with an additional week in the company's fiscal calendar quarter."
But the company's restructuring efforts, which began in October when it hired Goldman Sachs to work out how it could make annual savings of $150 million per year by the end of 2000, will see it consolidate six business units into two.
The existing Nearline and Enterprise Disk business groups will become part of a new Enterprise unit, while the current Client Server Tape, Disk and Storage Networking business groups, including Storage Area Networks, will become part of a new Client Server division.
The firm has also undertaken a management reshuffle, changed from a direct sales to a primarily channel focused model in the US and Canada, and established new sales geographies.
This will lead to the elimination of between 500 and 600 jobs during the first quarter of 2000, a move that comes after the 600 or so redundancies that took place in the fourth quarter of 1999.
At the same time, however, Storagetek said that David Weiss had recommended to the company's board of directors that he resign as chairman, president and chief executive.
The board has accepted his resignation, but asked him to continue his duties until a replacement is found. It has formed a search committee and hired Spencer Stuart & Co to help the committee find a successor.
Weiss said: "I believe that new management will energise the company and deliver value for our shareholders, customers, and employees. I am pleased that the board agreed with my recommendation."
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