Fierce competition in the disc drive market claimed its latest victim last week, with Seagate Technology announcing the closure of its Irish factory, axing up to 1,400 jobs.
The closure of the plant in Clonmel, Eire, comes as the volatile storage industry finds itself locked into a price war and feeling the shockwaves from the economic crisis in east Asia. Seagate officials blamed industry pressures and falling profit margins for the decision, which will affect 1,100 full time employees.
The plant will close early next year, as part of a worldwide review of Seagate operations. Seagate, a major US disc drive vendor, has had a worrying year - in the first quarter of 1997 it lost $240 million and the consensus among industry analysts is that upcoming second quarter earnings will be down again. Restructuring costs alone could reach $100 million.
But pulling out of Ireland is not just a panic measure, according to Woody Monroy, a Seagate spokesperson:.?Clonmel is our most expensive factory worldwide,? he said. ?The products were coming to the end of their shelf life. We have excess capacity at the moment, so our goal is produce less more efficiently.?
This is a market where bigger is better. ?Big companies like Seagate are building larger and larger production plants,? argued George O?Connor, an IT analyst at IDC. He believes the forces of globalisation are producing an industry standard with ?larger global brands forcing out the smaller players by producing units at a cheaper cost.?
Seagate?s main rivals in the sector - Quantum and Western Digital - have also suffered similar slumps recently, performing well below analysts? estimates.
Seagate took advantage of tax incentives from the Irish government, designed to attract inward investment. In 1995 it signed a 10-year contract with the Industrial Development Agency and by pulling out within that period it will have to hand back #10 million .
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