Seagate Tumbles the Most in 7 Years as Forecasts Miss Targetsby
Seagate Technology Plc shares tumbled the most in seven years after the maker of disk drives reported preliminary third-quarter earnings that missed its previous targets, hurt by the global slump in sales of personal computers.
The company late Wednesday said it expects to report fiscal third-quarter revenue of $2.6 billion, compared with its previous forecast for $2.7 billion. Adjusted gross margins will be about 23 percent, lower than previous projections of 25.6 percent, Seagate said.
The stock fell as much as 18 percent, its biggest intraday drop since January 2009. The shares were trading down 17 percent, to $28.03 at 10:12 a.m. in New York. They have tumbled 39 percent in the past year through Wednesday.
Cupertino, California-based Seagate said the earnings miss is being driven by reduced demand for the company’s traditional hard disk drives, silicon and desktop products primarily in China. Its decision not to participate aggressively in the low-capacity notebook market also contributed, the company said.
“We are disappointed that we did not anticipate the weaker demand in the March quarter," Chief Executive Officer Steve Luczo said in the statement. "There are many complex issues impacting the traditional go to market channels in our market, which are reducing our forecast visibility."
Seagate, which competes with Western Digital Corp. in the computer hard-drive market, has felt the shift away from personal computers and related components to mobile devices in recent years. Its sales have declined as customers turn to alternatives such as solid state drives or flash-based storage.
Worldwide personal-computer shipments slid to their lowest quarterly total since 2007 in the first quarter, according to market researcher Gartner Inc.
Seagate, the third-worst performer on the Nasdaq Composite Index, also dragged down shares of other computer component makers. Western Digital fell 9.1 percent to $40.72. Shares of data storage provider NetApp Inc fell 4.6 percent to $25.48.
Deutsche Bank Securities analyst Sherri Scribner downgraded the stock from buy to hold Wednesday, citing a limited near-term upside in Seagate shares.