Seagate Tech 1Q Profit Down 17% On Lower Margins

Seagate Technology Inc.’s (STX) fiscal first-quarter profit fell 17% on lower margins, and the computer disk-drive maker’s results fell short of Wall Street’s expectations. Seagate, one of the world’s largest hard-drive makers, returned to profitability in the past year as demand rebounded from a drop during the recession. But the company, which is especially strong in higher-margin high-end drives used by corporate customers, in the previous quarter reported lower unit shipments and unfavorable pricing on disk drives at some capacity and blamed the debt crisis in Europe and slower consumer spending there and in the U.S. Conditions in the market have long been volatile, with competitors racing to introduce drives that store more data at ever-lower prices. Challenges include the rise of data-storage devices based on chips known as flash memory, which cost more but are compact and energy-efficient. Rival Western Digital Corp. (WDC) on Tuesday reported its fiscal first-quarter profit dropped 32% on lower margins despite increased revenue and shipments. For the quarter ended Oct. 1, Seagate reported a profit of $149 million, or 31 cents a share, down from $179 million, or 35 cents a share, a year earlier. Excluding write-downs and other impacts, earnings fell to 37 cents from 58 cents as revenue rose 1.3% to $2.7 billion. Analysts estimated earnings of 45 cents on revenue of $2.72 billion, according to a poll by Thomson Reuters. Gross margin fell to 20.4% from 24.5%, below the company’s long-term forecast. The disk-drive business has been known for razor-thin margins and excess capacity. Seagate shipped 49.2 million hard-disk drives, below the 50.7 million units that Western Digital did. Seagate’s shares closed at $15.37. The stock is down 16% this year, but has climbed about 20% since Seagate late Thursday said private-equity firms had expressed interest in taking the company private in what could be an $8 billion deal.

Source: Dow Jones Newswires