UPDATE: Seagate Tech 1Q Profit Triples; 4Q View Rosy 10/20 06:46 PM
(Updates with details, further comments)
By Jerry A. DiColo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Seagate Technology Inc. (STX:$15.55,00$0.00,000.00%) posted its first profit in a year as its fiscal first-quarter earnings tripled, helped, in part, by a return of demand for storage in servers and notebooks.
The computer disk-drive maker also forecast revenue this quarter higher than average Wall Street estimates as customers transition to Seagate's (STX:$15.55,00$0.00,000.00%) new, higher margin storage products.
"At a time when economic conditions remained challenging, we are very pleased with the company's financial performance, delivering strong revenues, margins and cash generation," said Chief Executive Steve Luczo. He predicted gross margins would remain between 22% and 26%, higher than many expected.
Seagate (STX:$15.55,00$0.00,000.00%) , the world's largest hard-drive maker by sales, has seen demand strengthen as companies begin spending on technology after a long drought. Luczo said in an interview that disk drive sales are gaining traction across almost all end-markets, and spending by businesses might be improving more than other tech companies have suggested.
"I think there is a bit of an enterprise recovery," he said.
Seagate's (STX:$15.55,00$0.00,000.00%) shares were recently down 1.9%, to $15.25 in after-hours trading. The stock, which reached its 52-week high last week, has soared from its all- time low of $2.98 in January.
For the quarter ended Oct. 2, Seagate (STX:$15.55,00$0.00,000.00%) reported a profit of $179 million, or 35 cents a share, up from $57 million, or 12 cents a share, a year earlier. Excluding write-downs and restructuring charges, earnings jumped to 58 cents a share from 26 cents. Analysts expected 47 cents.
Revenue dropped 12% to $2.66 billion. Last month, Seagate (STX:$15.55,00$0.00,000.00%) said it expected revenue at or slightly above its raised July forecast of $2.4 billion to $2.6 billion.
For the current quarter, Seagate (STX:$15.55,00$0.00,000.00%) expects revenue of $2.75 billion to $2.85 billion compared with analysts' average estimate of $2.75 billion, according to a survey by Thomson Reuters.
Gross margin rose to 24.5% from 17.3%, above Seagate's (STX:$15.55,00$0.00,000.00%) prediction of 23% to 24%, helped by the company's move to newer products and higher volume production in its factories.
In the past year, the company has worked to cut costs drastically as well, shedding more than a quarter of its labor costs, suspending its dividend and selling $430 million of notes.
Luczo said that there are currently no plans to reinstate the dividend, as the primary use for any excess cash will be to bring the company's debt-level down to about $1.6 billion to $1.75 billion, given current revenue levels.
And having additional cash on hand, he said, might still be prudent given the repercussions of the recession felt by Seagate (STX:$15.55,00$0.00,000.00%) earlier this year.
"We want to get to a point where the company is never at risk," said Luczo. " It felt not so fun in January."
-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@ dowjones.com |
