Seagate Revises 4Q Guidance - Analyst Blog
11 Luglio 2012 - 11:30AM
Zacks
Seagate Technology PLC (STX) has lowered its
revenue and gross margin guidance for the fourth quarter ending
June 30, 2012 citing lower volumes.
Last week, the hard disk drive (HDD) manufacturer provided a
financial update, indicating shipments of around 66 million units
for the month of June with revenue being $4.50 billion and gross
margin 33.6%. During its third quarter 2012 conference call,
Seagate projected revenues of roughly $5.0 billion and gross margin
of 34.5% for the June quarter. The fourth quarter results will be
announced on July 30, 2012.
The unit shipment could have been better, but Seagate stated that a
recovering phase in the HDD sector (post the Thailand flood) and an
enterprise-class drive quality issue led to lower shipments. Other
factors that affected shipments were slower-than-expected market
share gains and weak demand stemming from macro-economic
uncertainties.
Concurrent with the negative pre-announcement, Seagate issued a
conservative outlook for the September quarter (the first quarter
of fiscal 2013). Given the number of customers affected by the
macro slowdown, Seagate now expects the addressable market to be
relatively flat sequentially. It is therefore adjusting its
production and inventory planning accordingly. Average selling
prices are expected to remain relatively stable, however, most
likely on account of the improving product mix.
Apart from providing a gloomy outlook, Seagate also announced to
return shareholder value. The company announced that it bought back
the targeted 45 million shares during the quarter for $1.2 billion.
This indeed, would boost Seagate’s earnings potential as well as
investor sentiment.
We believe that Seagate’s weakness is short term. Full recovery in
the HDD industry and increasing demand will position Seagate as the
leading player in the market. Seagate has larger exposure to
high-end corporate desktop and enterprise server markets than its
rival Western Digital Corp. (WDC).
Nevertheless, lackluster PC demand and increasing use of SSDs will
continue to pressure HDDs. But Seagate’s growing exposure in the
Enterprise SSD market will help it generate healthy revenues in
fiscal 2012 and beyond, which in turn will improve margins.
Currently, Seagate has a Zacks #3 Rank, implying a short-term
“Hold” rating.
SEAGATE TECH (STX): Free Stock Analysis Report
WESTERN DIGITAL (WDC): Free Stock Analysis Report
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