Seagate plans to buy rest of software unit

Veritas deal comes at a time of losses

Computer industry

September 04, 1999|By BLOOMBERG NEWS

SCOTTS VALLEY, Calif. -- Seagate Technology Inc., the world's No. 1 computer disk-drive maker, says it will buy the rest of its software unit, gaining control of an investment it can use for acquisitions or sell to raise cash.

The company will acquire the 6.5 percent of its Seagate Software unit it doesn't now own for 8 million shares, or about $280 million, and take a $216 million charge. Seagate also gets full ownership of 61 million shares of Veritas Software Corp. shares, valued at about $4 billion, which are owned by the software unit.

Seagate is expected to report a loss this quarter and is slashing prices to compete with rivals in the worst bout of price-cutting in recent years.

The purchase gives Seagate unhindered access to the Veritas shares, which it can sell or use to buy other companies.

"Seagate wants to recognize whatever gains it gets from Veritas," said Jean Orr, an analyst at Nutmeg Securities, who rates Seagate "hold."

By owning all of the software unit, a Seagate sale of the Veritas stock wouldn't need approval of the unit's shareholders or option holders. That would make a share sale less complicated and give Seagate the full proceeds, Seagate officials said.

Seagate declined to comment on which company, if any, it may be interested in buying or specific moves that it plans.

Seagate gained its stake in Mountain View, Calif.-based Veritas when it sold its Network Storage and Management Group to the software maker in a June for about $2.7 billion in Veritas stock.

But Seagate warned in July that it might lose money in its fiscal first quarter, which ends in September. In the second quarter, it's expected to earn 1 cent a share. In the year-earlier quarter, it had net income of $104 million, or 42 cents a share.

Seagate is eliminating 1,600 jobs in Singapore, or about 10 percent, of its work force there and said additional cuts at its other Asian facilities are possible.

Western Digital and Quantum Corp., the No. 2 disk-drive maker, also announced job cuts to survive the price battle that has roiled the industry for a good part of this year.

Seagate's shares rose $1.75 yesterday to close at $35.75.

Shares of Veritas, which makes software that helps companies manage and store information, have increased 176 percent in 12 months. They closed at a record $65.625 yesterday, up $2.6875, almost double the 92 percent gain for Seagate's shares in the same period.

Pub Date: 9/04/99

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