Shares of Quantum Corp. fell $4.88 per share, or 20 percent, to $18.94 Thursday after company officials announced the disk drive maker would fall woefully short of earnings estimates in its second quarter.
Quantum now expects to post a profit of between 25 cents to 35 cents per share in the quarter, much less than the 60 cents per share Wall Street had predicted. In its first quarter, Quantum reported a profit of $103 million, or 62 cents per share, on sales of more than $1.5 billion.
"It is clear that the significant negative impact of the continued intense pricing pressures in the distribution channel will outweigh any positive impact of improved channel or product mix in terms of our overall results," CEO Michael Brown said in a prepared statement.
Quantum's confession comes as competitor Seagate Technologies Inc. announced that it would close its manufacturing plant in Ireland and layoff about 1,400 employees. Seagate also said its fourth-quarter earnings would falter after taking a large restructuring charge.
"Historically, disk drive stocks go through this cyclical decline more frequently than other tech stocks," said Don Collier, an analyst at ProLytix Corp., a Santa Barbara, Calif.- based stock tracker. "But this time around, there's more competition than there's been in the past."
DISK/TREND Inc., a Mountain View, Calif. market research firm, predicts worldwide sales will crack $34 billion in 1997, eventually eclipsing $75 billion in the year 2000.
"You've got IBM with all their resources making some very competitive and popular products and Asian firms cranking them out with less overhead," Collier said. "A Quantum or Komag really has its work cut out for it."
Quantum officials said it will reduce manufacturing through the rest of the quarter but still expects to have record unit shipments.
"OEM demand for our desktop products remains strong, we have a strong product portfolio, and we are pleased with the ramps of our new desktop products," Brown said in the statement.
Since peaking at $42 per share in August, Quantum's stock has made a steady decline to Thursday's price of $18.94. Quarterly revenue has remained stagnant at about $1.5 billion throughout the past year.