Disk drive manufacturer Seagate Technology cited favorable demand and pricing for its products Wednesday when it raised its guidance for its fiscal 2009 fourth quarter.

The company, which is headquartered in the Cayman Islands but operates out of Scotts Valley, now expects sales to come in at between $2.2-$2.3 billion, up from the $1.9-$2.2 it had forecast in April, while gross margin is expected to improve as much as 15 percent, higher than the 10-11 percent it had previously estimated for the period.

The company attributed the improved gross margin to “improved operational efficiencies, product management” along with a transition to its new products.

Seagate said its own inventories along with the industry’s as a whole “continue to be below historic levels,” leading it to predict that sales in its fiscal 2010 first quarter will be between $2.35 – $2.50 billion with gross profit margin climbing to 18 percent.

Western Digital, the disk drive maker based in Southern California, said that demand in its current quarter is “tracking ahead of the expectations which (Western Digital) outlined in its last earnings call on April 23.” At that time, management projected sales in a range between $1.45 billion and $1.6 billion and earnings ranging from 16 to 26 cents per share.

The news was contained in a filing with the Securities and Exchange Commission ahead of meetings the company is expecting to have this week and next with investors and analysts.

The company also said that price declines have been “at the lower end of the anticipated range for desktop and notebook products and within the expected range for branded, consumer electronics and enterprise products.”

In other news, Standard & Poor’s announced yesterday that shares of Western Digital (ticker: WDC) would replace Embarq on its S&P500 index as soon as that company’s acuqisition by CenturyTel.

William Watkins, the former chief executive of Seagate Technology who departed in a January management shake-up by the disk drive manufacturer, was named Tuesday to the board of directors at Flextronics, the Singapore supplier of electronics contract manufacturing services with U.S. operations based in San Jose.

Watkins will be paid $60,000 for his service on the board and another $60,000 a year for his service on the board’s audit committee. He’ll also received an option grant good on 25,000 when he joined the board, along with a yearly grant of options on 12,500 more shares and an annual stock bonus award worth $100,000.

His naming came the same day Flextronics reported the retirement from the board of Rockwell Schnabel, former ambassador to the European Union.

Seagate Technology, which cut its most recent quarterly dividend 75 percent, said today it is discontinuing it altogether as a move to “further enhance liquidity” and reduce cash “outflows” by an estimated $60 million annually.

Last week, Seagate renegotiated some of the terms of its credit facility with JPMorgan Chase, Morgan Stanley, BNP Paribas, Keybank National, Wachovia and the Bank of Nova Scotia in order to increase its “flexibility in meeting its obligations.”

The company slipped the dividend cancellation news toward the bottom of a release it issued Monday saying it now expects to report shipments of 39 million units and revenue of $2.1 billion during its recently completed quarter, exceeding its previous guidance of $1.6-$2 billion.

In order to increase its “flexibility in meeting its obligations” under its current credit agreement”, Seagate Technology on Friday renegotiated some of the terms of its credit facility with JPMorgan Chase, Morgan Stanley, BNP Paribas, Keybank National, Wachovia and the Bank of Nova Scotia.

The new terms will allow the company’s “net leverage ratio” — basically the amount of debt it may hold divided by its cash and other short-term investments — to rise from the original 1.50 to 1.80 during its current quarter and to  as high as 2.65 for the quarter ended Oct. 2.

The amended agreement also calls for the interest rate to increase to 350 basis points above the LIBOR rate.

Seagate will have to maintain $600 million worth of cash and short-term investments at the end of each month in the meantime, and it agreed to reduce the amount it could borrow under the agreement to $350 million from $500 million.

Seagate also agreed to “further limitations” on the amount of other debt it could take on, or shares it could repurchase. It spent $3 billion dollars buying back its own stock during its last two fiscal years. It made no such purchases during the first two quarters of fiscal 2009, despite a 70 percent plunge in its stock price during that period.

While some companies are trimming the size of their boards in order to save costs, Seagate Technology expanded its board by two to 11 members earlier this month to accommodate the appointments of former Motorola chief executive Ed Zanders and McAfee’s current chief financial officer, Rocky Pimentel.

Zander, who stepped down as Motorola’s chief in February 2008, continued serving as a strategic advisor to Motorola’s co-CEOs until January. Payments toward his $1.5 million severance salary just came to an end at the end of February. Seagate pays its directors a $50,000 retainer for their service.

Pimentel will also serve on the board’s audit committee, according to an SEC filing the company made Monday, good for an additional $25,000. He became CFO at McAfee last year after serving the same function since 2004 at Glu Mobile, a publisher of mobile games.

Seagate Technology, the Cayman Islands disk drive maker that operates out of Scotts Valley, today announced that it is terminating five senior vice-presidents and 17 vice-president-level employees, which represent about 20 percent of Seagate’s vice-president-and-above-level positions.

The terminations, which take effect on May 4, “represent steps taken by (Seagate) to realign its overall management organiztion and reduce costs while increasing spans of control and decreasing managment layers to support the business outlook going forward,” according to its regulatory filing with the SEC today.

Also leaving is one of the company’s top officers, Brian Dexheimer, who was named division president to Seagate’s consumer solutions group just about this time last year after having served as the company’s chief sales and marketing officer.   Dexheimer was appointed to the position of division president of the consumer solutions group on March 10, 2008. Previously he was chief sales and marketing officer from 2006 to 2008. He first joined the company in 1997.

So as “to ensure a smooth transition of his responsibilities,” Dexheimer will remain employed with the company through its fiscal year, which ends in June. Details about his severance package are not available because its terms “are still under negotiation.”

In January, Seagate said it would lay off nearly 3,000, or about 10 percent, of its workers, and lower salaries for its executives, and even reduced its dividend by 75 percent, all in an effort to preserve cash. Those moves came after the return of Steven Luczo as Seagate’s chief executive following the termination of the company’s previous CEO, Bill Watkins.

Seagate Technology is set to pay $2.5 million any day now to the chief executive it fired last month, according to the terms of his “separation and release” agreement the company filed Tuesday with the SEC as an amendment to its quarterly financials.

The money is to be paid to him with ten days of his signing the agreement on Feb. 4. He’ll get another $2.5 million payment within ten days of Dec. 2, 2009, so long as he complies with all the do’s and don’ts of his severance agreement.

Between now and then, Watkins will serve as a consultant to Seagate’s board and CEO, getting $500 an hour. He’ll also be provided administrative support through June to help him in this capactiy.

As far as his stock-based compensation goes, though, Watkins is being dealt with by the book. All his unvested options were cancelled upon his termination and he was given the standard three-month period during which he may exercise his vested options.

(Some companies use a consulting relationship to extend the period during which its departed executive may exercise his or her options. For example, SumTotal Systems made its departing CEO a “business advisor” after he stepped down last November and extended the exercise period for him by as much as two years.)

Watkins will also have to arrange for continuation of his health, vision and dental coverage at his own expense once his company-paid benefits expire Feb. 28. Unlike most of us, though, the company has offered him $29,944 to help defray the costs of his COBRA coverage. And between now and June 30, Watkins is eligible for an all-expense paid physical performed at the famed Mayo Clinic in Rochester, Minnesota.

Should Seagate be acquired anytime in the next six months, Watkins would be owed an additional $2.5 million payment by the end of the year, all of his “cancelled” stock-based compensation would instead become fully vested and exerciseable, and he’d get an extra $9,981 toward his health care coverage.

Seagate has offered to help Watkins find another job, too, arranging for him to receive “outplacement assistance” from Right Management Consultants, a division of Manpower.

And here’s the “perk” we most enjoyed: he company agreed not to contest any claim Watkins makes for unemployment.

As for Steven Luczo, the chairman of its board and its former CEO who has returned to lead it once again, he’ll be getting the same $1 million salary his predeccesor was paid, although he and other top executives at Seagate have agreed to take pay cuts of as much as 25 percent. He’ll also be eligible for a bonus targeted at 150 percent of his salary to be paid at the “sole discretion of the board.”

Luczo, who already owns 4.6 million shares of Seagate, was also give an option grant good for 3.5 million more that were to be priced Jan. 30, a day when Seagate shares closed at $3.79, 53 percent below their average price over the last year, along with 150,000 shares of a performance-based bonus.

Seagate Technology, the disk drive maker that’s in the process of cutting nearly 3,000 jobs, or about six percent of its worldwide work force, said Wednesday it would reduce the dividend it pays its shareholders by 75 percent, from 12 cents to 3 cents per share.

Seagate, a disk drive manufacturer that is based in the Cayman Islands but operates from Scotts Valley, lowered its guidance last month for its 2008 fourth quarter. Today it said preliminary results for that period show a net loss of $496 million on $2.3 billion in sales.

Last week the company removed its chief executive, William Watkins, replacing him with the company’s chairman and former CEO Stephen Luczo, and accepted the resignation of its chief operating officer.

Seagate Technology, the disk drive manufacturer that last week said it was going to reduce its worldwide work force by about six percent, said severance costs for the approximately 2,950 employees affected by the layoffs would be about $90 million. The layoffs include a reduction of its U.S. work force of 10 percent, indicating that workers in this country are absorbing a majority of the cuts.

The company estimated that it will take a charge of about $90 million, mostly in its 2008 fourth quarter, that will consist mainly of employee termination costs.

Seagate also said it would be reducing the salaries of certain management employees beginning in February, with pay for its chief executive and other executive officers being reduced 25 percent, for its senior vice presidents by 20 percent, its vice presidents by 15 percent, and for its management, sales, supervisors and professional employees by 10 percent.

The salary cuts will save the company about $80 million, $10 million less that the cost of severance being paid out to the nearly 3,000  employees it is firing.