Seagate Posts Strong Profit, but Says Growth Could Stall
Seagate Technology Inc., the world’s largest computer hard-drive maker, reported Tuesday that its fiscal first-quarter earnings topped Wall Street analysts’ expectations, but warned that parts shortages could hamper growth in the months ahead.
The Scotts Valley, Calif.-based company, which is being taken private, reported a profit of $62 million, or 26 cents a share, for the quarter ended Sept. 29, compared with 7 cents a share a year ago. Sales rose 4%, to $1.75 billion.
The results beat a consensus analyst forecast for earnings of 21 cents, according to First Call/Thomson Financial. Estimates ranged from 19 cents to 21 cents.
Shares of Seagate closed down $1 at $62.94 on the New York Stock Exchange, before the earnings were released. Seagate stock has risen since dropping as low as $26.56 about a year ago, but are down from a March high of $76.
Seagate said it suffered from electronic components shortages in the just-concluded quarter and expects the deficit to extend into the next three months.
Suppliers of components to makers of disk drives and other computer-related products have failed to keep pace with demand.
Shortage of parts may hurt Seagate’s ability to boost revenue and offset declining prices for disk drives. The drop in disk-drive prices exceeded the historical average of 8% to 10% in the quarter-ended September.
Seagate’s gross margins fell to 21.1% in the first quarter, from 22.9%, because of “aggressive” price declines.
The shortages have hurt the company’s sales in Asia, where revenue made up 22% from total sales, from 26% in the previous quarter.
In March, Seagate said it was being taken private in a $20-billion transaction by a private investor group that included Seagate management and Menlo Park, Calif.-based Silver Lake Partners.
In the past, Seagate, along with the rest of the industry, suffered from plunging prices of disk drives. But the company said in August it had managed to offset some of the price declines by reducing costs through automation. Seagate cut its staff to 57,508 in the quarter ending September, from 59,656 in the previous quarter.
The low-margin disk-drive industry is facing greater consolidation, and Seagate’s market dominance is being challenged.
Rival computer hard-drive maker Maxtor Corp. said last week it would buy Quantum Corp.’s hard-drive unit Quantum HDD for $1.08 billion to put itself on equal footing with Seagate.
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Reuters and Bloomberg News were used in compiling this report.
