Seagate, Western Digital Slump After Weak Earnings Resultsby
Results squeezed by lower demand for PCs and newer technology
Seagate seeking to reduce `cost structure,' CFO says on call
Seagate Technology Plc and Western Digital Corp. shares slumped Friday after the storage companies reported results and gave predictions that fell short of analysts’ estimates. The results highlighted continued struggles to overcome declining PC demand and attempts to adapt to shifts in the way big companies store data.
Seagate shares fell as much 16 percent in New York Friday morning, on course for their lowest close since 2012. Western Digital dropped 15 percent, extending a declines of more than 20 percent this year.
The companies’ earnings are being squeezed from multiple sides. The personal-computer market that’s historically provided them with most of their revenue shrank to a nine-year low in the first quarter of 2016. Data storage at companies and in cloud data centers, which had helped offset that slump, is increasingly being done using drives made of semiconductors, a technology they don’t have.
Seagate said third-quarter profit, after some items, was 22 cents a share, well below the average analyst forecast of 39 cents. It projected fourth-quarter revenue of $2.3 billion, below the analyst average estimate of $2.61 billion. Western Digital reported third-quarter earnings, excluding some items, of $1.21 a share, below the average analyst estimates of $1.27. Revenue also came in slightly below analysts’ forecasts.
Western Digital is trying to lessen its reliance on the aging spinning magnetic disk technology that is the heart of its drives by buying SanDisk Corp. a maker of the flash memory chips that are increasingly being used in storage.
“While we are disappointed we did not anticipate the weaker demand in the March quarter, the company is evaluating and implementing a variety of actions to reduce the company’s cost structure,” David Morton, chief financial officer of Seagate, told analysts on a conference call.