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 MILPITAS, Calif., Nov. 4 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG), a leading supplier of thin-film disks and heads for high- performance Winchester disk drives, today announced that Dastek Inc., its thin-film head joint venture with Asahi Glass America Inc., has taken steps to reduce operating costs in light of lower revenue expectations over the next several quarters. As part of the cost reduction effort, Dastek will reduce its work force in the U.S. by approximately 85 people and institute a work furlough program at its offshore manufacturing location. The company does not currently anticipate the closure of any Dastek facilities. Prior to the work force reduction, Dastek employed approximately 500 people in San Jose and another 880 persons in Penang, Malaysia.
 "Having just completed a major product transition from minislider to microslider thin-film head products during the first six months of 1993, Dastek experienced at mid-year a decline in demand for its thin- film microsliders as other recording head suppliers extended the capabilities of older technology metal-in-gap (MIG) heads. To avoid direct competition with these lower-priced MIG heads, we decided at that time to accelerate our transition to higher capability, smaller-sized nanoslider heads. Although this new transition creates opportunities for Dastek, it also presents near-term difficulties. Our older microslider product programs will generate lower revenues in future quarters due to the sharp price declines and reduced unit volumes resulting from the competitive market conditions. Our new nanoslider products are currently undergoing qualification at our customers and are not anticipated to ramp into volume production until the first quarter of 1994. To lessen the bottom line impact of this reduction in revenue, we are implementing a comprehensive cost-reduction program," said James B. Downey, president and chief executive officer at Dastek.
 The reduction in the U.S. work force at Dastek will include 52 direct production employees and 33 indirect personnel in various functional areas. The reduction was effective today and the company has provided a severance package to the affected employees. Work furloughs instituted at Dastek's Penang facilities will vary with the fluctuations in production volumes. The labor-intensive operations at these facilities convert wafers produced at Dastek's U.S. wafer fab into fully assembled and tested thin-film heads. In addition to these labor force reductions and furloughs, hiring and wage freezes were implemented throughout Dastek's operations. Dastek also expects to reduce fourth quarter expenses through plant shutdowns during the Thanksgiving and Christmas/New Year holidays.
 "Although we remain bullish on the long-term opportunities in the recording head market, we must face the financial reality that the continuing losses at Dastek require corrective actions. Our immediate focus is to reduce the losses experienced at Dastek and to focus our thin-film head efforts on high-end, advanced nanoslider head products. If this strategy is successful, we have the opportunity over time to capture market share from independent MIG head producers as microsliders are replaced by nanosliders and from other thin-film suppliers that sell to the OEM market. MIG heads now comprise approximately one-third of all recording heads used by disk drive companies. Longer-term, we are encouraged by the prospects of exploiting our knowledge of both heads and disks to produce mechanically superior head and disk designs. Our joint development work with Hewlett-Packard in the area of magnetoresistive (MR) head products continues to proceed well and we expect to be in volume MR head production in 1995," said Stephen C. Johnson, Komag Inc.'s president and chief executive officer.
 As previously announced and despite this cost-reduction program, failure to achieve volume production on a majority of the new thin-film head design programs over the next several quarters, due either to internal qualification and production issues at Dastek or to drive program delays initiated by customers, would have a material adverse effect on Dastek's financial condition and competitive market position. Such a result could also have a material adverse effect on Komag's consolidated operating performance.
 For the third quarter of 1993, Komag reported consolidated net income of $4.1 million or $0.19 per share. The company's media operations posted a net income of $9.7 million on net sales of $84.0 million, while Dastek recorded a net loss of $9.3 million on net sales of $13.5 million. Upon consolidation into Komag's financial statements, Dastek's net loss is reduced by recognition of Asahi's 40 percent minority interest.
 Founded in 1983, Komag is the world's largest manufacturer of computer hard disks. Komag is the only independent volume supplier of both thin-film disks and, through its Dastek joint venture, 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. Komag also manufactures and sells rewritable optical disks for magneto-optic disk drives.
 Komag and its consolidated subsidiaries maintain 870,000 square feet of manufacturing and administrative space in California and Malaysia, and employ approximately 3,600 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.
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 /CONTACT: David H. Allen, T. Hunt Payne or William L. Potts Jr., all of Komag, 408-946-2300; or Fred Hoar of Miller Communications 415-962-9550, for Komag/

CO: Komag Inc.; Dastek Inc. ST: California IN: CPR SU: RCN

PK -- SJ002 -- 0905 11/04/93 16:05 EST
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Publication:PR Newswire
Date:Nov 4, 1993

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