Seagate losses dim hopes for plants

The announcement by Seagate Technology of worse-than-expected operating losses for the second quarter, has heightened existing doubts over the company's plans to expand its operation in Derry and establish a new plant in Cork.

Seagate, which last month announced the closure of its manufacturing plant in Clonmel, Co Tipperary, with the loss of 1,400 jobs, attributed the losses to severe pricing pressure from Asian markets and weaker-than-expected disk drive demand.

"Revenues from drive operations were significantly less than previously anticipated and are currently estimated to be approximately $1.5 billion (£1.1 billion) for the quarter," the company said. Mr Ian O'Leary, corporate communications manager at Seagate, said he would be very surprised if the company made any announcement about the Cork and Derry projects before early April. "All our plants feed into a finished product, so a problem for the finished product means problems for all parts of the business."

With poor first and second-quarter results recorded, it seems unlikely that Seagate will consider the proposed £148 million investment in Cork in the short term. According to a senior source, it is more probable that the review period will be extended.

Last night the US director of corporate communications, Mr Woody Monroy, was reluctant to comment, except to say: "We announce our financial results on January 20th; until then we are in our quiet period. It would be inappropriate to comment on the Irish situation at this stage."

The world's largest disk drive maker said total revenues for the quarter to January 2nd, 1998, were projected to be $1.65 billion - more than 31 per cent below the total revenues of $2.4 billion the company posted a year ago. Following the announcement of predicted restructuring charges in October of $50 to $100 million, a final decision on whether to proceed with the proposed new 1,000-job project in Ringaskiddy, Co Cork was postponed for six months. An expansion to the Derry plant, where Seagate already employs 1,400 people, was postponed at the time of the Clonmel closure last month.

Seagate now expects to report restructuring and other charges of $250 million.

This is the second consecutive quarterly shortfall for Seagate. In October, the company reported an unexpected first-quarter net loss of $240 million, compared with a profit of $129 million in the year ago period.