Maxtor Corporation Provides Update on the First Quarter 2006 Financial Outlook
04 April 2006 - 11:05PM
PR Newswire (US)
Expected Revenue, Gross Profit Margin and Net Loss Affected by
Pending Acquisition MILPITAS, Calif., April 4
/PRNewswire-FirstCall/ -- Maxtor Corporation (NYSE:MXO) today
provided an update to its financial guidance for the first quarter
ended April 1, 2006. While industry conditions during the first
quarter were within typical seasonal expectations, Maxtor faced
challenges related to its pending acquisition by Seagate
Technology. During the first quarter, Maxtor experienced lower than
expected unit volume growth, largely attributable to the pending
acquisition. This lower than expected unit growth, combined with
marginal merger-related market share losses, placed increased
pressure on the Company's already burdened cost structure and
constrained Maxtor's ability to compete, especially on the low-end
of the desktop drive market. In addition, due to the pending
Seagate merger transaction, the Company was unable to realize some
component cost improvements that it anticipated in the quarter,
which also negatively affected the gross profit margin. Because of
the decrease in volume, the Company significantly reduced its
production schedule in the first quarter. Accordingly, Maxtor will
eliminate approximately 900 positions at its Singapore
manufacturing facility over the next several weeks. As a result,
the Company expects to take an approximately $6 million reserve in
the first quarter for severance-related expenses from the reduction
in force. The Company's first quarter financial results will also
reflect a charge for unamortized debt issuance costs related to its
2.375% Convertible Senior Notes due 2012. Under the terms of the
Indenture governing the Senior Notes, the Senior Notes are
convertible, at the option of the holders, at any time during a
fiscal quarter if during the last 30 trading days of the
immediately preceding quarter, the Company's common stock trades at
a price in excess of 110% of the conversion price for 20
consecutive trading days. This conversion condition was met when
the closing price of Maxtor's common stock exceeded $7.18 per share
for 20 trading days within the last 30 days of trading ended April
1, 2006. As a result, the Company will classify the $326 million of
Senior Notes as short-term debt on its April 1, 2006 balance sheet.
In addition, Maxtor will expense approximately $7.4 million in
unamortized debt issuance costs. The Company believes that the
likelihood that any holder of the Senior Notes will exercise its
conversion right is remote. With these factors, Maxtor's revised
guidance for the first quarter of 2006 is as follows: -- Revenue
between $875 and $885 million; -- Gross profit margin of
approximately 2%; -- A net loss of between $(100) and $(104)
million, or $(0.39) to $(0.40) per share on a GAAP basis; and --
Cash balance in excess of $500 million. The Company is working
through its normal close process and expects to announce its first
quarter 2006 financial results on Wednesday, April 26, 2006, after
the close of the market. The Company will not hold an investor
conference call relative to its first quarter results. The Company
is also discontinuing its prior practice of providing guidance on
its financial performance for any future quarters, including the
second quarter ending July 1, 2006. About Maxtor Maxtor Corporation
(http://www.maxtor.com/) is one of the world's leading suppliers of
hard disk drives and consumer storage solutions. The Company has an
expansive line of storage products for desktop computers, storage
systems, high-performance Intel-based servers, and consumer
electronics. Maxtor has a reputation as a proven market leader,
built by consistently providing high-quality products, services and
support for its customers. Maxtor and its products can be found at
http://www.maxtor.com/ or by calling toll-free 800-2-MAXTOR. Maxtor
is traded on the New York Stock Exchange under the symbol MXO. This
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The
statements contained in this release that are not purely
historical, including, without limitation, statements regarding our
expectations, beliefs, intentions or strategies regarding the
future, are forward-looking statements. Examples of forward-looking
statements in this release include statements regarding updated
financial guidance for the first quarter ended April 1, 2006,
likelihood that a holder of Senior Notes will exercise their
conversion right, future customer demand, pricing of our products
and general market conditions. These statements are based on
current expectations and are subject to risks and uncertainties
which could materially affect the Company's results, including, but
not limited to, market demand for hard disk drives, qualification
of the Company's products, market acceptance of its products, the
Company's ability to execute future development and production
ramps and utilize manufacturing assets efficiently, changes in
product and customer mix, the availability of components, pricing
trends, actions by competitors, general economic and industry
conditions, the impact of the announced transaction between Maxtor
and Seagate Technology on current customer demand prior to the
closing of the transaction, and the possibility that Seagate's
pending acquisition of Maxtor will not be consummated on a timely
basis or at all. These and other risk factors are contained in
documents filed with the Securities and Exchange Commission
("SEC"), including, but not limited to, the Company's Form 10-K for
fiscal year ended December 31, 2005 filed with the SEC on February
22, 2006 and in Seagate's registration statement on Form S-4 filed
with the SEC on March 14, 2006 (SEC File No. 333-132420).
Forward-looking statements are based on information available to
the Company as of the date of this release and current
expectations, forecasts and assumptions involve a number of risks
that could cause actual results to differ materially from those
anticipated by the forward-looking statements. Maxtor is under no
obligation (and expressly disclaims any obligation) to update or
alter its forward-looking statements, whether as a result of new
information, future events or otherwise. Important Additional
Information On December 21, 2005, Maxtor announced that it had
entered into a definitive agreement with Seagate Technology, which
provides for Seagate to acquire Maxtor in a merger transaction. In
connection with the proposed transaction, Seagate filed a
Registration Statement on Form S-4 with the SEC on March 14, 2006
containing a preliminary Joint Proxy Statement/Prospectus (SEC File
No. 333-132420). This registration statement has not been declared
effective by the SEC. Each of Seagate and Maxtor has filed, and
will continue to file, with the SEC other documents regarding the
proposed transaction. The definitive Joint Proxy
Statement/Prospectus will be mailed to stockholders of Seagate and
Maxtor. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC
CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders can obtain free copies of the Registration Statement and
the Joint Proxy Statement/Prospectus and other documents filed with
the SEC by Seagate and Maxtor through the web site maintained by
the SEC at http://www.sec.gov/. In addition, investors and security
holders are able to obtain free copies of the Registration
Statement and the definitive Joint Proxy Statement/Prospectus and
other documents filed with the SEC from Seagate by directing a
request to Seagate Technology, 920 Disc Drive, P.O. Box 66360,
Scotts Valley, California 95067, Attention: Investor Relations
(telephone: 831-439-5337) or going to Seagate's corporate website
at http://www.seagate.com/; or from Maxtor by directing a request
to Maxtor Corporation, 500 McCarthy Boulevard, Milpitas, California
95035, Attention: VP of Investor Relations (telephone:
408-894-5000) or going to Maxtor's corporate website at
http://www.maxtor.com/. Seagate and Maxtor, and their respective
directors and executive officers, may be deemed to be participants
in the solicitation of proxies in respect of the proposed
transaction. Information regarding Seagate's directors and
executive officers is contained in Seagate's Annual Report on Form
10-K for the fiscal year ended July 1, 2005 and its proxy statement
dated October 7, 2005, which were filed with the SEC. Information
regarding Maxtor's directors and executive officers is contained in
Maxtor's Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, its proxy statement dated April 11, 2005,
supplemental proxy statement dated May 10, 2005, Current Report on
Form 8-K dated August 24, 2005 as well as Seagate's Registration
Statement on Form S-4 dated March 14, 2006, which were filed with
the SEC. Additional information regarding the interests of such
potential participants is included in the Joint Proxy
Statement/Prospectus and the other relevant documents filed with
the SEC. DATASOURCE: Maxtor Corporation CONTACT: Karen Clyne, Media
Relations, +1-408-894-5958, or Jenifer Kirtland, Investor
Relations, +1-408-324-7056, both of Maxtor Corporation Web site:
http://www.maxtor.com/
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