Summary
Seagate Technology plc (STX) announced a significant restructuring plan on June 27, 2016, involving a global headcount reduction of approximately 1,600 employees, representing 3% of its workforce. This initiative is part of a broader effort to reduce the company's cost structure. The company anticipates this restructuring will be largely completed by the end of the September 2016 quarter. Investors should note that this plan is expected to incur pretax charges of $62 million, primarily in the fiscal fourth quarter of 2016, with cash outlays anticipated in the September 2016 quarter. However, the restructuring is projected to yield substantial annual cost savings, estimated at $100 million on a run-rate basis, benefiting cost of revenue and operating expenses. These savings are expected to begin materializing in the September 2016 quarter. Seagate also indicated that further details regarding global footprint consolidation and restructuring would be disclosed as actions are finalized.
Key Highlights
- 1Seagate is undertaking a restructuring plan that includes reducing its global workforce by approximately 1,600 employees (3% of total headcount).
- 2The company expects to incur pretax charges of $62 million related to this restructuring.
- 3These charges are anticipated to be recorded primarily in the fiscal fourth quarter of 2016, with cash outlays occurring in the September 2016 quarter.
- 4The restructuring is projected to generate annual cost savings of approximately $100 million on a run-rate basis.
- 5These cost savings are expected to be realized starting in the September 2016 quarter.
- 6The savings will favorably impact both cost of revenue (estimated $48 million) and operating expenses (estimated $52 million).
- 7Seagate anticipates completing the majority of these reductions by the end of the September 2016 quarter.