Western Digital to lay off 2,500, close plants

Storage company Western Digital today joined the ranks of companies scaling back their workforces, announcing a cost restructuring that will involve a worldwide headcount reduction and closure of manufacturing facilities.

"We expect demand weakness to last well into the middle of the 2009 calendar year," John Coyne, president and CEO of WD said in a prepared statement. The company has seen increasingly competitive pricing from the likes of Hitachi and Seagate coupled with a decreased demand for hard drives overall. The projected revenue ceiling for the December quarter has dropped from $2.15 billion down to $1.8 billion.

Therefore, in the interest of cutting operating expenses, WD enacted a production freeze that will last from December 20 to January 1.

This is, of course, a short term solution. For the long term, it looks like most of WD's employees will be affected. Bonuses for executives, senior management and the board of directors will be cut back, hourly employees' schedules will be cut back 20%, and capital spending will be reduced by about $250 million.

Approximately 2,500 employees will be laid off in this cost-cutting plan, amounting to 5% of WD's total workforce. The company will also be closing one of its three hard drive manufacturing plants in Thailand, and either close or sell one of its media substrate factories in Malaysia.

WD anticipates the cutbacks will save $150 million in annual operating costs.

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