Seagate sales, profit fall; shares decline
(Reuters) - Seagate Technology Plc (STX.O) reported sharply lower quarterly profit on flagging demand for its computer hard drives and forecast a dip in profit margins this quarter as selling prices continue to erode.
The world's largest hard drive disk maker, which was in ultimately unfruitful discussions with private equity firms over a potential $9 billion takeover late last year, said it was considering a regular dividend, in addition to a massive share buyback plan announced in November, to reward shareholders.
The company, which makes a range of disk drives for computers and external storage devices, said fiscal second-quarter net profit fell to $150 million, or 31 cents per share, compared with $533 million, or $1.03 per share, in the year-ago quarter.
Sales fell 10 percent to $2.7 billion, hurt by a slowdown in demand for hard drives, especially in Asia.
Excluding some items such as restructuring costs, it reported earnings of 33 cents per share, matching Wall Street's average estimate.
Seagate's shares fell 4.8 percent in after-hours trading, after falling 3 percent in regular trading on Nasdaq.
Chief Executive Steve Luczo said the hard-drive industry has "marginal" excess capacity and faces "muted consumer demand" for PCs but strengthening demand for PCs from companies.
For the current quarter, the company forecast revenue of $2.55 billion to $2.7 billion, and gross profit margin of 18 percent to 19 percent, citing some uncertainty in the market and the cost of materials not declining in step with hard drive selling prices. Wall Street is estimating $2.6 billion in sales this quarter and gross profit margin of 19.9 percent. In the last quarter, it was 19.5 percent.
Seagate's report comes the day after rival Western Digital Corp (WDC.N), the world No. 2 hard-drive maker, warned that 6 million to 8 million unused hard drives in the personal computer supply chain could cause a glut and hurt sales of new drives this quarter.
After the failed buyout talks last year, Seagate announced a $2 billion share buyback plan, partially financed by a $750 million debt offering in December. CEO Luczo said the company used $305 million to purchase 21 million shares in December alone. He added that he is still looking at other ways to boost shareholder value, including introducing a quarterly dividend.
On Wednesday, the company said it had agreed a $350 million revolving credit line with lenders.
(Reporting by Bill Rigby; Editing by Bernard Orr)
Credit: Reuters (www.reuters.com)
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