Hutchinson Tech Product Demand, Sales Show Rebound
Hutchinson Technology-which reduced its work force in March and has struggled in recent years amid weak demand for its products-appears to be on the rebound.
On Wednesday, the Hutchinson-based disk-drive component maker reported preliminary results indicating that it shipped approximately 118 million suspension assemblies in the third quarter that ended June 11, representing a 15 percent increase from the previous quarter.
A suspension assembly holds a computer chip that reads data above a spinning hard disk in desktop computers, PCs, and enterprise server systems.
“Our shipments over the last nine weeks of our third quarter averaged approximately 10 million suspensions per week, and we expect this pace to continue into the fourth quarter,” Hutchinson Technology President and CEO Wayne Fortun said in a statement. “As a result, we currently expect our fourth-quarter shipments to exceed our third quarter shipments.”
The company also said that its third-quarter net sales would increase 14 percent to about $72 million-significantly higher than the $65.52 million predicted by analysts polled by Thomson Reuters. Full third-quarter results will be reported on July 26.
The positive preliminary results prompted shares of the company's stock to close up 21.1 percent at $2.75 Wednesday. Mid-day Thursday, shares were trading at $2.88.
In March, Hutchinson Technology announced plans to move some of its component manufacturing-which then took place in its namesake city and in Eau Claire, Wisconsin-to Thailand. The company said at the time that the restructuring would reduce its work force by 30 to 40 percent, or between 683 and 910 positions. In April, the company announced that the move would cut annual costs by $50 million to $55 million annually, starting in March.
Analysts have mixed views of Hutchinson's recent resurgence.
“I think Hutchinson can sustain this recovery, because their cost cuts have been dramatic,” Mark Miller, an analyst at Noble Financial Capital Markets in Boca Raton, Florida, told the Star Tribune. “The cost cuts combined with improved overseas efficiencies have brought their break-even point down to $75 million or less-and they're already at $72 million in the third quarter.”
But not everyone thinks that the company's recovery will last.
Jayson Noland-an analyst who follows Western Digital, which uses the company's suspension assemblies-told the Star Tribune that the company's turnaround could be long-term if other disk drive makers buy more of its parts. But if the company continues to rely heavily on Western Digital, its gains might only be temporary. Earlier this year, Western Digital accounted for 58 percent of Hutchinson's revenue, and it's expected to lose market share to Toshiba, according to the Minneapolis newspaper.