Seagate Technology Holdings plc, a major manufacturer of disk storage, today reported fiscal third-quarter revenues that slightly exceeded the low end of its guidance.

In conjunction, the company announced a new restructuring initiative intended to reduce costs. Seagate is aiming to lower its operating expenses by $200 million annually.

In recent years, many enterprise applications have been moved from disk storage to faster flash-based systems. However, hard drives continue to be widely used because of their cost efficiency. Nasdaq-listed Seagate is one of the top suppliers of hard drives to the enterprise and consumer markets. 

The company closed its fiscal third quarter ended March 31 with revenues of $1.86 billion. That’s significantly less than the $2.8 billion Seagate posted a year ago, but the drop is not unexpected. The company’s third-quarter revenue is at the low end of the guidance it published last quarter, which projected between $1.85 billion and $2.15 billion in sales.

The revenue decline was partly the result of cooling demand among data center operators. According to Seagate, a few large customers scaled back their hard drive purchases. The company cited high disk storage inventory levels among cloud providers as another factor that weighed on its revenue. 

“We are seeing a more elongated customer inventory correction that led to weaker-than-expected nearline demand among a few large customers late in the quarter,” Chief Executive Officer Dave Mosley detailed in a statement. “Consequently, our March quarter revenue came in at the low-end of our guidance range.”

The sales drop pushed Seagate into the red during the quarter. The company lost $433 million after earning a $346 million profit the year prior. That translated into an adjusted loss of 28 cents per share.

Nevertheless, there were a few bright spots in Seagate’s third quarter results. The company reported that its enterprise systems and nearline storage segments experienced quarter-over-quarter revenue growth. Nearline storage is the term for hard drives optimized to hold infrequently accessed data.

To address the storage industry headwinds, Seagate announced a restructuring initiative in conjunction with the release of its quarterly results. 

The company expects to take a pre-tax charge of $150 million in connection with the move. The charge will consist of costs associated with “employee severance and other one-time termination benefits,” which indicates Seagate plans to lay off workers. According to the storage maker, the initiative is expected to reduce its operating expenses by $200 million annually. 

The development comes a few weeks after Seagate disclosed plans to let go 480 workers. Last October, the company announced another workforce reduction that affected approximately 3,000 employees.

Seagate stressed today that it will “continue to execute on our product roadmap, including our strategically vital HAMR platform” despite the cost-cutting push. HAMR is a new storage technology that powers the company’s most advanced hard drives.

Hard drives store data in tiny magnetic modules called grains. According to Seagate, its HAMR technology writes data to grains with the help of a built-in laser emitter. The technology makes it possible to create hard drives that have significantly more capacity than earlier products.

Seagate plans to start shipping HAMR-powered hard drives with 30 terabytes of capacity during its first fiscal quarter, which starts in July. The company is also integrating the technology into its Corvault line of data storage systems. Today, Seagate detailed that the first Corvault systems with 30-terabyte HAMR drives will also start shipping in its fiscal first quarter.

The launch will position the company to address an unexpected uptick in storage demand. “Looking ahead, we now expect demand recovery to begin towards the end of the calendar year,” Mosley said. “In response to this dynamic environment, we are taking aggressive actions to lower our cost structure while still positioning Seagate to thrive over the long term and sustain our technology leadership.”

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