News

posted on 01 May 2008 10:30

Hutchinson Technology reported lower revenues and increased losses against a background of a booming disk drive market.  

The company makes disk drive suspension assemblies and its situation is troubled, and not helped at all by having investments in collaterized student loan securities, the value of which has been down-graded. (Er, if the company thinks its own cash is better invested in student loan securities then why should its shareholders give it cash? Surely there is a cheaper way to invest directly in student loan securities than by subsidising a loss-making disk drive assembly maker acting as an indirect student loan security investment broker.)

The basic figures make grim reading: Net revenue for Q2fy08 of $143.8 million, down about 16 percent on Q2fy07’s $170.7 million. The net loss was almost doubled at -$6.2 million (-$0.25/share) vs Q2fy07’s -$3.6 million (-$0.14/share).

It shipped about 179 million assemblies in the quarter vs 205 million in the year-ago quarter. With decreased plant utilisation, gross margin in Q2fy08 was 13 percent, compared with 19 percent in the preceding quarter and 18 percent in Q2fy07. It has lost market share in selling assemblies in the 3.5-inch ATA market and been affected by OEM market share changes in the 2.5-inch sector. The company is pinning hopes on a new TSA+ assembly and on firing 80 staff.

To add to its joy the company’s second division, BioMeasurement, also lost money – that’s a consistent executive performance at least.

Regarding industry conditions and the company's outlook for the second half of its fiscal year, Wayne Fortun, president and CEO,  said storage industry analysts expect disk drive shipments to increase approximately 12 percent in calendar year 2008, resulting in continued growth in worldwide suspension assembly shipments.

"However, based on our estimated share positions on customers' programs and a decline in our average selling price in the second half of our fiscal year, we estimate that our net sales for fiscal 2008 will be 10 to 15 percent lower than our fiscal 2007 net sales of $716 million"

Hutchinson has had a year to do something about is disk drive assembly losses and has failed to do it.

Fortun said: “Looking ahead, we are focused on rebuilding our position in the 3.5-inch ATA segment, strengthening our position in the 2.5-inch mobile segment and maintaining our market-leading position in the enterprise segment."

Hutchinson says the student loan security down-valuing is temporary.

^{[Paul Roberts, news editor.]}