Wednesday, July 20, 2011

Seagate Technology (NASDAQ: STX): Q4 Earnings Preview 2011

Seagate Technology PLC (NASDAQ: STX), the world's largest hard drive disk maker, is scheduled to release its fiscal fourth-quarter earnings after the closing bell on Wednesday, July 20, 2011. Analysts, on average, expect the company to report earnings of 24 cents per share on revenue of $2.70 billion. In the year ago period, the company reported earnings of 70 cents per share on revenue of $2.66 billion.

Seagate Technology engages in the design, manufacture, marketing, and sale of hard disk drives for the enterprise, mobile computing, desktop, consumer electronics, and branded solutions market applications of the disk drive industry in North America, the Far East, and Europe. The company sells its disk drives primarily to major original equipment manufacturers (OEMs), distributors and retailers. In addition to manufacturing and selling disk drives, the company provides storage services for small- to medium-sized businesses, including online backup, data protection and recovery solutions.

In the preceding fiscal third-quarter, the Dublin, Ireland-based company's net income was $93 million, or 21 cents per share, compared to $518 million, or $1 per share, in the year-ago period. On an adjusted basis, the company earned 25 cents a share in the latest quarter. Revenue fell to $2.70 billion from $3.05 billion. Analysts, on average, expected the company to report earnings of 27 cents per share on revenue of $2.66 billion. 

In April, Seagate agreed to acquire Samsung Electronics' for $1.375 billion in equal measures of cash and stocks. As a result, Samsung Electronics will own approximately 9.6 percent of Seagate and get to nominate one new member to join Seagate's Board of Directors, while the two companies have further agreed to deepen their strategic relationship with related cross-licensing and supply stipulations. Samsung will provision Seagate's solid state drives with NAND flash memory, whereas Seagate will furnish Samsung's PCs and consumer electronics products with hard disk storage. The deal is expected to complete in full by year's end. Seagate expects the deal to "meaningfully" add to its earnings per share and cash flow in the first year, and said it plans no material restructuring costs.

The company has continued to benefit from strong demand for data storage hardware as more consumers create, share, and store increasingly rich digital content such as digital photographs, music, videos, and other multimedia files. The hard disk drive industry has also got a boost from improving corporate technology spending and increased interest in cloud services. 

However, industry experts believe that the demand for hard disk drives is likely to slow down due to the growing popularity of tablet PCs and other handheld devices. Typically, handheld devices like tablets use NAND flash memory instead of traditional hard disk drive for storage. Seagate is currently focusing primarily on enterprise-class solid-state drives.

To counter a slump in demand for hard disks, Seagate is working to develop alternatives, such as external devices that connect to tablets to deliver music and other content, and so- called hybrid drives, which contain components of both hard disks and the flash drives that are growing in popularity.

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