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Q&A: Seagate CEO talks about the Maxtor acquisition

Bill Watkins says Maxtor brings with it good manufacturing facilities and engineers

December 21, 2005 12:00 PM ET

Computerworld - In a surprise move today, Seagate Technology announced that it has struck a deal to purchase its chief competitor in the hard disk drive manufacturing market, Maxtor Corp. Bill Watkins, president and CEO of Seagate Technology, spoke with Computerworld after the $1.9 billion deal was announced about what technology Maxtor brings to the table and what the merger will mean for both companies (see "Seagate to buy Maxtor for $1.9B in stock").
Will this result in layoffs at Maxtor and Seagate? Yes.
Layoffs at both companies or just at Maxtor? You could make the argument it might be more on their side. But it's too early for us to tell you who's going to go.
What does Maxtor bring to the table considering this is a company that has been losing money? After doing due diligence, [we found] they're in better shape than most people realize. Historically, when deals have been done in this industry, people have gone out to acquire some sort of product road map, technology or specific business. This is not what this is about. We're very comfortable with our product road map and very comfortable with our manufacturing and platforms and strategy. This is really about bringing over the Maxtor revenue and leveraging it through our infrastructure. We get tremendous scale of value from that.
On the gross margin side, as we layer this revenue over our fixed cost, we get an efficiency there. If you look at the [operating expenditures], we believe in the combined company we can eliminate about $300 million in expense, getting tremendous leverage out of our engineering resources. One way to think about this is, in a sense, we're buying revenue and leveraging it through our operating matrix.
Where will this $300 million in savings come from? I believe I can run the combined company with about 25% more spending than I currently do at Seagate.
When do you expect to see this deal close? I think it's going to be in the second half of calendar year 2006. I expect six to nine months.
What other value is there in this deal? There are some assets we think are valuable over there. Their China facilities, their media facilities we feel are both state of the art and are capable of going forward with perpendicular [recording technology]. We believe they have a very good brand in that space. I think from an additional engineering resources perspective, they have some good people that we can bring on.
You're already developing perpendicular technology. How does Maxtor bring that to the table for you? They



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