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Seagate Earnings Miss Estimates on Lower Shipments

Jan. 19 (Bloomberg) -- Seagate Technology Plc, the world’s largest maker of computer disk drives, reported second-quarter profit that missed analysts’ estimates as customers shunned machines based on its kind of memory, favoring rival technology.

Profit excluding some items was 33 cents a share, Scotts Valley, California-based Seagate said today in a statement. That was a penny short of the 34-cent average of estimates compiled by Bloomberg. Sales fell 10 percent to $2.72 billion in the period ended Dec. 31.

Analysts predict Seagate’s fiscal 2011 net income will drop more than 60 percent from last year as consumers buy smartphones and other products, such as Apple Inc.’s iPad, that use flash-memory storage instead of a hard disk. Seagate is working to innovate with hybrid drives and external devices that connect to tablets to deliver music and other content. Rival Western Digital Corp. posted profit yesterday that beat estimates.

“It’s somewhat disappointing,” said Mark Miller, an analyst with Noble Financial Group Inc. in Danville, California, who recommends buying Seagate shares and owns some himself. “We expected somewhat better after watching Western Digital report.”

Seagate fell 5 percent to $13.41 in late trading after dropping 45 cents to $14.13 today on the New York Stock Exchange. The shares declined 17 percent last year.

Shipments of disk drives in the second quarter dropped 2 percent to 48.9 million in the quarter, the company said. Net income fell to $150 million, or 31 cents a share, from $533 million, or $1.03, a year earlier.

Revenue Forecast

In the current quarter, sales will be $2.55 billion to $2.7 billion, the company said. That compares with analysts’ average projection of $2.63 billion.

Seventy-five percent to 80 percent of its disk drives will be hybrid -- containing both hard-disk and flash-drive components -- in five years, the company said on a conference call with analysts after the earnings were released.

The company spurned an acquisition offer of more than $7.5 billion from TPG Capital in November and turned down a proposal from Western Digital, according to two people familiar with the matter. Luczo said this month that both bids fell short of the $3.5 billion in equity needed for the company to accept, and potential acquirers were unwilling to increase their offers because of economic concerns.

Seagate sold $750 million of bonds last month and plans to raise as much as $350 million in loans to refinance debt after rejecting the two buyout proposals.

Western Digital, based in Lake Forest, California, reported second-quarter net income yesterday of $225 million, or 96 cents a share, topping the 59-cent average of analysts’ estimates. Still, the company forecast third-quarter sales of $2.2 billion to $2.25 billion, trailing projections.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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