Disk-drive maker SyQuest Technology will lay off 50 percent of its approximately 2,000 employees, in a restructuring that will result in the closure of its Fremont manufacturing plant in California. SyQuest also announced that revenues for the third quarter would be lower, and operating losses higher than the second quarter, when the company lost $29.9m (£17.68m) on sales of $47m (£28.65m) Officials said the restructuring is part of an attempt to cut expenses in half.
SyQuest, which has lost money each of the past three fiscal years, has been fighting a pitched battle against Iomega for the desktop removable storage market. SyQuest, which once dominated the market, has steadily lost share to Iomega. The company said late Thursday it will focus on its 1GB SparQ drive, which it says has strong demand in retail channels. But the company warned it expects revenues to decline further in the September quarter and plans to take a charge for restructuring. Officials said they expect a seasonal boost to revenues in the December quarter. "In terms of restructuring the product line and building a market, they've done a good job," said James Porter, president of Disk/Trend in the US. "But that market hasn't grown to as large a level as they thought it would."
Porter said both SyQuest and Iomega have spent heavily on advertising and promotions for their products. But the companies have to compete with more than just each other -- against newer forms of low-end storage, and against the growing capacity of fixed storage.
SyQuest said it also plans to scale back administrative, sales marketing and research expenses and make cost-cuts at the Penang, Malaysia, manufacturing facility.
Last month, SyQuest hired investment bankers CIBC Oppenheimer to assist the company in an "ongoing review of strategic and financial alternatives".