[Dow Jones] 20:34 T =Seagate Tech-2: Sees Flat To Modest Growth In 3Q Vs 2Q
While the number of companies in the disk drive industry hasn't declined as a
result of slumping demand during the past year, several have been losing money,
Luczo, Seagate's chief executive officer, said. "Pricing levels are very, very
competitive," he said.
Luczo declined to break down to what extent Seagate's second-quarter gains
came from better market conditions and to what extent they reflected operating
improvements. "The real measure (of progress) is going to be how do you respond
to the dark periods of the future," he said.
At Seagate management is "positioning the company to have (these) kind of
results in a very tough environment," Luczo said. "We still have a lot of work
in front of us."
But the company pointed to evidence of improved productivity and
competitiveness in the second-quarter results, including a gross margin of
23.8%, up from 20.7% during the first quarter. The margin on software sales,
which totaled $92 million in the second quarter, was 86.9%, Luczo said.
Seagate's inventory fell to $410 million at the end of the second quarter,
down from $761 million at the end of the first quarter, but that didn't satisfy
Luczo. "We can do better," he said. Cost of goods sold on an annual basis was
13.4 times the company's quarter-ending inventory, but Seagate wants to boost
that ratio to 15, he said.
Seagate has also reduced the time it takes to get new products on the market
so that it introduces innovations during the same quarter as its competitors,
but it hasn't yet achieved its goal of being the leader in time to market, he
said.
Seagate's cash position grew $345 million, to $2.2 billion, during the second
quarter. That advance was boosted by a $140 million tax refund and was net of a
$100 million stock repurchase, Luczo said.
Total employment fell to 83,900 at the end of the quarter, down from 85,300
at the end of the previous quarter.
Although the winter season is normally slow, Seagate expects "flat (to)
modest growth ... for the company in the third quarter with improving margins"
compared with the quarter just reported.
Seagate expects the pending sale of a portion of its software business to be
completed by the end of the third quarter.
-By Rick Jurgens; 602-258-2003; richard.jurgens@cor.dowjones.com
(END) DOW JONES NEWS 01-12-99
08:34 PM
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