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 MILPITAS, Calif., Sept. 14 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG), a leading supplier of thin-film components for high- performance Winchester disk drives, today announced that its net income and earnings per share for the second half 1993 will most likely be lower than the comparable results for the first half of 1993. The company also indicated that its third quarter 1993 net income will exceed the prior year's third quarter net income of $6.1 million, or 29 cents per share, and that its fourth quarter 1993 net income will likely fall below the results for the third quarter of 1993.
 During the first half of 1993 Komag's consolidated net sales totaled $196.7 million, including $165.0 million in media revenue and $31.7 million in recording head revenue. Consolidated net income for the first half of 1993 was $15.7 million, or 72 cents per share. Media operations recorded net income of $23.6 million, while Dastek Inc., the company's consolidated thin-film head joint venture with Asahi Glass America Inc., posted a net loss of $13.2 million. Upon consolidation into Komag's financial statements, Dastek's net loss was reduced by recognition of Asahi's 40 percent minority interest. Media net income for the first half of 1993 included $2.5 million in post-tax equity income based upon Komag's 50-percent interest in Asahi Komag Co. Ltd. (AKCL), the company's unconsolidated thin-film media joint venture in Japan.
 "We have recently experienced a softness in the order rates for our thin-film disk products," said Stephen C. Johnson, Komag's president and chief executive officer. "We believe the prolonged weak market conditions within the disk drive industry, together with an increased industry supply of high density, 1400 Oersted (Oe) media, has led to increased price competition and the softening in demand. The company, however, is experiencing a rapid product transition to higher performance, higher priced 1600 Oe media that will partially offset these negative trends. By taking limited corrective measures we should be able to effectively utilize our media capacity in the U.S. and Malaysia during the second half of 1993, thus minimizing the reduction in earnings at these particular operations," Johnson said.
 While Komag ships over 90 percent of its disk products manufactured in the U.S. and Malaysia for use in disk drives capable of storing 500 megabytes or more, AKCL remains more dependent on the desktop computer market due to its portfolio of Japanese customers. A significant order reduction from a major customer, coupled with weak market conditions in Japan, will prevent AKCL from fully utilizing its capacity during the fourth quarter of 1993. This fourth quarter order reduction, coupled with a limited opportunity to sell disk products to Komag for subsequent resale outside of Japan, may cause AKCL to post an operating loss during the fourth quarter.
 "Based upon our most current internal forecasts, Dastek's net sales and earnings for the second half of 1993 will show little, if any, improvement over the first half of 1993," said Johnson. "The expected production ramp of certain new nanoslider products will occur more slowly than previously anticipated due to delays in the product qualification efforts. As a result, the sales growth that we expected for the fourth quarter of 1993 will be delayed. In addition to the reduced sales level, price competition will also negatively affect Dastek's financial performance during the second half of 1993. Failure to achieve volume production on these new head programs over the next several quarters, due either to internal qualification and production issues at Dastek or to drive program delays initiated by customers, will have a material adverse effect on Dastek's financial condition and competitive market position," he said.
 "While the uncertain market conditions within the disk and recording head markets currently limit our forward visibility and forecasting accuracy, we remain very positive on the long-term outlook for our markets. Customer interest in our advanced inductive thin-film recording head designs remains high and we plan to intensify our efforts in the product development and qualification areas. Initial sample testing of our magneto-resistive (MR) heads by customers has resulted in high performance ratings for these products. Such MR results, unfortunately, will not contribute to improved financial results in the near term," said Johnson.
 "On the disk side of our business, we are well positioned from a product prospective with proven 1600 Oe media now shipping in volume. Our low glide, high performance 1800 Oe media has received favorable evaluations by our customers and will begin volume shipments in early 1994. Our U.S factories remain highly efficient and our new 220,000-square-foot Malaysian factory continues to exceed our performance expectations in all areas." Johnson said.
 Komag is the only independent volume supplier of both thin-film disks and thin-film heads, two performance enabling components used in today's advanced Winchester disk drives. Winchester disk drives are the primary storage devices used by computers. Founded in 1983, Komag and its consolidated subsidiaries maintain 870,000 square feet of manufacturing and administrative space in California and Malaysia, and employ approximately 3,400 people. Komag also manufactures and sells thin-film disk products through an unconsolidated subsidiary, Asahi Komag Co. Ltd., which is among the top three media producers in Japan.
 -0- 9/14/93
 /CONTACT: David H. Allen, William L. Potts Jr. or T. Hunt Payne, all of Komag, 408-946-2300/

CO: Komag Inc. ST: California IN: CPR SU: ERP

LH -- SJ003 -- 1963 09/14/93 17:25 EDT
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Publication:PR Newswire
Date:Sep 14, 1993

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