Seagate Technology Inc.'s (STX) recent stumbles are wider in scope than simply the declining economic environment, resulting from operational shortfalls and a lack of focus on pushing forward on technology, said new Chief Executive Stephen Luczo.

"There are significant short-term challenges facing Seagate," said Luczo in a conference call to discuss second-quarter results. "We haven't executed at the level that we are capable of."

Luczo said the current management team has "the highest regard" for former Chief Executive Bill Watkins, whom Luczo replaced last week in a management shake-up. And in an interview with Dow Jones Newswires, Luczo said that many of the steps to turn the hard-drive manufacturer around operationally have been started over the past year and need to be continued.

Still, Luczo said it is hard to see when a company isn't executing if the market is robust, an indication that the current recession had begun to expose existing flaws in Seagate's direction.

"The basic issue is really that when you have a management change, while it is certainly disruptive if it's not planned, the advantage is it does give you fresh eyes and ears immediately," said Luczo. In the current environment, he added, the company needs to react very quickly to facilitate the necessary changes.

Luczo had served as CEO at Seagate from 1998 to 2004. He led the company in a well-timed move to go private and then its subsequent re-emergence as a public company.

Late Thursday, Seagate reported a fiscal second-quarter loss on a sharp drop in revenue, cut its quarterly dividend by 75% and forecast third-quarter revenue below Wall Street expectations.

Seagate shares were recently down 4% at $4.08 in after-hours trading.

Seagate's outlook through the rest of the year mirrored the dire views of other computer parts suppliers, and Luczo said the difficulty now was developing the flexibility to quickly react to changes in the market.

"The reality is until the end of June, we're not going to have any visibility," he said.

Seagate needs to sustain its improving product execution to begin gaining market share back from rival Western Digital Corp. (WDC), he said, though in the conference call, Seagate executives said they don't expect any changes to occur through the company's fiscal third quarter.

Once market-share numbers begin to shift, Luczo said, "they move for a reason."

"The only way you only gain share - sustained gains of share - is through product execution," he said.

-By Jerry A. DiColo; Dow Jones Newswires; 201-938-5670; jerry.dicolo@dowjones.com

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