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KOMAG'S SECOND QUARTER WILL BE ADVERSELY IMPACTED BY LOSSES AT TWO SUBSIDIARIES; IMPROVEMENTS EXPECTED IN THE THIRD QUARTER

 KOMAG'S SECOND QUARTER WILL BE ADVERSELY IMPACTED BY LOSSES


AT TWO SUBSIDIARIES; IMPROVEMENTS EXPECTED IN THE THIRD QUARTER
 MILPITAS, Calif., June 19 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG), a leading supplier of thin-film components for high-performance Winchester disk drives, today announced that its second quarter results would be adversely impacted by higher-than-expected losses at Dastek Inc., its consolidated thin-film head joint venture. The company also confirmed that Asahi Komag Co. Ltd., its unconsolidated thin-film media joint venture in Japan, would post a loss during the second quarter. Komag also announced that it currently expects improved operating results from both subsidiaries during the third quarter.
 For the quarter ending on June 28, 1992, the company anticipates that the net loss at Dastek will be approximately $1 million higher than the net loss experienced in the first quarter of 1992. A substantial portion of this increased loss is attributable to the establishment of additional inventory reserves for older generation products which Dastek does not currently expect to sell. Dastek posted a net loss of $5.3 million in the first quarter of 1992 before recognition of Asahi Glass America Inc.'s $0.7 million minority interest in the net loss. Asahi obtained a 40 percent economic interest in Dastek following the closing of the joint venture on Feb. 28, 1992. The company also expects that Dastek's revenues for the second quarter will be 5 percent to 10 percent lower than those recorded in the previous quarter. Sales of thin-film heads during the first quarter of 1992 were $12.2 million.
 "We are continuing to improve both Dastek's thin-film products and manufacturing processes," commented Stephen C. Johnson, Komag's president and chief executive officer. "Our R&D and marketing efforts are proceeding according to our plans. Prospective customers of Dastek are presently evaluating prototypes of improved microslider and advanced nanoslider products," explained Johnson. "During the current quarter Dastek also completed renovations of its facilities in the U.S. and Malaysia. Despite the higher-than-expected loss in the second quarter, we continue to believe that Dastek will record higher thin-film head sales and post reduced net losses in the second half of the year as expected customer qualifications lead to increased production activity," stated Johnson.
 The company also announced today in a separate press release that Komag and Hewlett-Packard have entered into an alliance to develop and manufacture magneto-resistive (MR) thin-film read/write heads. "We are extremely pleased with today's announcement that we are moving ahead with what we believe to be a major advance in recording head technology," commented Johnson. Under the terms of the agreement, Komag will develop prototype magneto-resistive heads based upon engineering designs and processes developed by Hewlett-Packard. Upon successful completion of the MR head development effort, Komag will manufacture and supply sufficient quantities of MR heads to meet H-P's requirements. The agreement also allows the company to manufacture and sell MR heads to other disk drive manufacturers. Komag anticipates that its Dastek Inc. subsidiary will undertake the development and manufacture of the MR heads.
 "Our core business, thin-film disks, is experiencing very strong demand from the customers in the U.S. and we remain capacity constrained," commented Johnson. "During the latter part of the second quarter we began to see an increase in new orders towards higher density disks in all form factors, and a change in unit mix to a higher percentage of 3.5-inch disks. Such trends have generally led to improved gross margins. During the first quarter, 5.25-inch disk products accounted for approximately half of Komag's disk production. We expect that 5.25-inch disk orders, while reduced in percentage terms, will continue to be a significant part of business," noted Johnson.
 "As the company previously reported, disk manufacturing capacity in Japan during the first half of the year was greater than local demand. Unfortunately, this supply-demand imbalance will adversely affect the operating results of our unconsolidated Japanese joint venture, Asahi Komag Co. Ltd., causing a loss during the second quarter. Going forward, recent qualifications of AKCL-produced disks by Komag's U.S. customers and continued strong U.S. demand, combined with demand increases of AKCL product from Japanese customers, should lead to a return to profitability for AKCL in the third quarter this year," stated Johnson.
 Komag is a leading supplier of thin-film components for high- performance Winchester disk drives, and is the only volume supplier of both thin-film heads and thin-film disks to the merchant market. The company's thin-film products address the fast growing high-capacity, high-performance segment of the Winchester disk drive market. Winchester disk drives are widely used in a broad range of computer applications from mainframes to portable computers. Komag is the leading supplier of media to this market segment and manufactures the highest density disks commercially available for 5.25-inch and smaller form factors. In addition to thin-film disks, Komag manufactures precision disk substrates and thin-film heads through its two consolidated joint venture subsidiaries, Komag Material Technology and Dastek, respectively. Dastek is one of the three largest suppliers of thin-film heads to the merchant market. Komag also operates a technical support facility in Singapore.
 Komag and its consolidated subsidiaries maintain 668,000 square feet of manufacturing and administrative space in California and Malaysia, and employ approximately 2,600 people. The company also manufactures and sells thin-film disk products through an unconsolidated joint venture, Asahi Komag Co. Ltd., which is among the top three media producers in Japan. The company was founded in 1983.
 -0- 6/19/92
 /CONTACT: David H. Allen, T. Hunt Payne, or William L. Potts Jr. of Komag, 408-946-2300; or John Trifari of John Trifari Public Relations, 415-349-9812, for Komag/
 (KMAG) CO: Komag Inc. ST: California IN: CPR SU: ERN


MM -- SJ001 -- 1750 06/19/92 07:01 EDT
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Date:Jun 19, 1992
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