Seagate IPO Priced Below Expectations

Seagate Technology Holdings on Tuesday raised $870 million in an initial public offering after the biggest maker of computer disk drives cut the price by as much as 20% to entice investors.

The company, which is based in the Cayman Islands but is run from Scotts Valley, Calif., sold 72.5 million shares at $12 each. That was below the proposed range of $13 to $15.

The stock will begin trading today on the New York Stock Exchange under the symbol STX.

The sale of the 17% stake values Seagate at $5.1 billion. Silver Lake Partners, Texas Pacific Group and other buyout firms that own Seagate sold 48.5 million shares, while Seagate itself sold an additional 24 million.

The pullback in technology shares in recent days may have damped investor interest in the stock, some traders said. The tech sector rallied modestly on Tuesday after sliding for much of the last week.

Seagate’s IPO is the biggest initial stock sale by a technology company since Accenture Ltd.’s $1.9-billion deal in July 2001, according to Dealogic. Of 80 IPOs this year, five have been from technology firms.

Seagate has benefited from making drives for network server computers, which earn twice the profit of desktop PC drives, analysts say.

The company’s third-quarter revenue rose 22% to $1.59 billion from a year earlier, while income from operations jumped to $119 million from $46 million a year earlier.

Still, disk-drive makers often are valued lower than other computer-related companies because the drives are viewed as commodity products and can be subject to severe price cutting, some investors say.

“It’s a real cut-throat business,” said Brian Salerno, who helps manage $30 billion at Munder Capital Management Inc. and wasn’t planning to buy Seagate shares.