Seagate Surges Most Since January After Earnings BeatBy
CEO optimistic on securing access to chip supply from Toshiba
Hard disk drive makers benefit from data center demand
Seagate Technology Plc surged the most in almost nine months after reporting earnings that beat analysts’ estimates and telling investors it expects to have access to new technology that’s eating into its main business.
The company, the largest maker of computer drives, said earnings per share were 96 cents in the fiscal first quarter ended Sept. 29, surpassing analysts’ average projections for 86 cents. Revenue was $2.63 billion in the period, also better than expected. The shares jumped as much as 17 percent to $40.90.
Hard disk drive makers are benefiting from strong demand from data center owners who are struggling to keep up with the need for storage created by the flood of data from online services. Such demand is helping the industry stave off declining demand from the PC market, where storage based on semiconductors is taking over.
The report was a stark turnaround from the previous quarter, when the company said it was replacing its longtime Chief Executive Officer Steve Luczo and was shedding 600 jobs. Dave Mosley became the new CEO. Mosley told investors and analysts on a conference call to today that he expects to secure a long-term agreement with Toshiba Corp.’s memory chip unit to provide it with the components -- called Nand flash -- for new drives.
“Nand supply is key to transforming Seagate into an entity that sees revenue growth,” said Karl Ackerman, an analyst at Cowen & Co. “That could ultimately transform the company into one with top-line growth and earnings growth.”
At the end of September, Seagate said it would be part of a consortium that has agreed to acquire Toshiba’s memory chip business. The investment in the group, which includes Apple Inc., Dell Inc. and others, may secure Seagate cheaper access to the chips. It may also disrupt the company’s rival Western Digital Corp., which failed in a bid to acquire the Toshiba unit and may lose access to supply from its Japanese partner as the two argue in court about the future of their joint venture.