Very, very bullish outlook, in addition to results well above expectations. Stock is up to $19.62 AH, on over 2.5m shares.
Seagate Sees Gross Margins Above Target Range
01/20 05:08 PM
(Updates with additional details from conference call, outlook for current quarter, share price.)
By Jerry A. DiColo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Seagate Technology Inc. (STX:$17.76,00$-0.40,00-2.20%) swung to a fiscal second- quarter profit, as improving demand for digital storage led to double-digit- percentage sales growth.
The computer disk-drive maker's revenue topped its recently raised forecast, while the company's outlook for the current period was well above Wall Street estimates.
Chief Executive Steve Luczo attributed the strong results to improved operating efficiency and the company's position in high-performance products, as well as improving demand across the storage market.
"The demand for storage continued to accelerate throughout the calendar year," Luczo said during a conference call to discuss the results. He added that spending by businesses was stronger than Seagate (STX:$17.76,00$-0.40,00-2.20%) had expected.
Seagate (STX:$17.76,00$-0.40,00-2.20%) , the world's largest hard-drive maker by sales, has reported a recovery in demand as businesses begin to increase spending on tech products.
Both Seagate (STX:$17.76,00$-0.40,00-2.20%) and rival Western Digital Corp. (WDC:$44.26,00$-0.70,00-1.56%) have seen demand for disk drives return even as supplies of the devices remain low, pushing up profits.
The company shipped a record 49.9 million hard-disk drives in its second- quarter, up 35% from a year earlier. Meanwhile, gross margin rose to 30.5% from 13.9%, above the company's long-term forecast of 22% to 26%. Company officials said they expect to remain above the forecast in 2010.
Seagate's (STX:$17.76,00$-0.40,00-2.20%) stock has soared over the past year, reaching a 19-month high of $ 19.04 in January after falling to all-time lows of under $3 a year ago.
Seagate (STX:$17.76,00$-0.40,00-2.20%) shares rose 7.8% to $19.15 in after-hours trading Wednesday after closing down 2.2% amid a broad market selloff. The stock was boosted by the company's strong outlook.
For the current quarter, Seagate (STX:$17.76,00$-0.40,00-2.20%) expects earnings of 88 cents a share to 92 cents a share on revenue of $2.9 billion to $3.1 billion. Analysts had expected, on average, per-share earnings of 56 cents and $2.7 billion in revenue, according to Thomson Reuters.
The disk-drive business is known for razor-thin margins and excess capacity, but tight supplies are expected to help boost prices and margins at the company.
Additionally, Seagate (STX:$17.76,00$-0.40,00-2.20%) last month launched a new storage drive based on flash memory instead of a spinning disk. The new solid-state drive is faster and uses less energy.
For the quarter ended Jan. 1, Seagate (STX:$17.76,00$-0.40,00-2.20%) reported a profit of $533 million, or $ 1.03 a share, compared with a loss of $2.82 billion, or $5.80 a share, in the year-earlier period, which included write-downs of $2.32 billion. Analysts estimated earnings of 65 cents a share.
Revenue climbed 33% to $3.03 billion. In October, Seagate (STX:$17.76,00$-0.40,00-2.20%) predicted $2.75 billion to $2.85 billion.
Seagate's (STX:$17.76,00$-0.40,00-2.20%) Luczo said last quarter that business spending on technology wasn't as bad as many others in the industry had claimed. Wednesday, he said that the company's own estimates for business spending in the last quarter proved conservative.
And while the introduction of Microsoft Corp.'s (MSFT:$30.585,0$-0.52,00-1.66%) Windows 7 software hasn't yet resulted in increased PC purchases, Luczo expects the new operating system to drive demand in 2010.
For the third quarter, the company expects the total disk-drive market will be 155 million to 160 million units.
Seagate (STX:$17.76,00$-0.40,00-2.20%) said it would raise capital spending to $750 million in 2010 even as computer-component supply remains below demand.
-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@ dowjones.com |
