Seagate Technology, the nation's largest manufacturer of hard-disk drives for computers, will move a disk-manufacturing operation employing 500 people to Anaheim from Brea. Danbus Memory Systems of San Diego will operate Seagate's old Brea plant.
Hard disks are permanently mounted in personal computers and used to store data on the magnetic coating of their surfaces.
Seagate, based in Scotts Valley in Santa Cruz County, has been spending a lot of money on expanding its production of disks, a strategy that increased sales 32% last year--to $1.3 billion--while chopping net income by 45%, to $77.3 million.
Production outstripped demand, and Seagate was left with a lot of unsold disks, the company said.
Seagate has been cutting back production at its plants recently, stock analysts said, but not in Orange County.
Seagate said Wednesday it is moving to larger quarters to turn out even more disks, which it has already begun selling to other manufacturers. The manufacturers then add their own magnetic coating before marketing the disks.
The Seagate factory will finish moving into a 122,000-square-foot plant at 3845 Coronado St. in Anaheim by the end of the month.
"Until recently they've used a Japanese strategy of building heavy production capacity and aggressively setting (low) prices" to dominate the market for disks, said John T. Rossi, an analyst in the San Francisco office of Alex Brown & Sons.
Rossi called Seagate the "IBM of the disk industry."
"But their sales estimates were too high, and a lot of people are jeering at them now," he said, "although I think it's too early to tell."
Sales of disks are expected to decline as the market becomes saturated with personal computers, stock analysts said.
Danbus Memory makes larger, 8-inch disks used for more powerful computers as well as the smaller 5-inch disks used in personal computers. The firm projects sales of $15 million this year.