Seagate Technology Reports Fiscal First Quarter 2010 Results

Seagate Technology Reports Fiscal First Quarter 2010 Results

  • Quarterly revenue of $2.66 billion 
  • Establishes long-term gross margin target of 22-26% 
  • Fiscal year-to-date debt reduction of $685 million

SCOTTS VALLEY, Calif. - October 20, 2009 - Seagate Technology (NASDAQ: STX) today reported financial results for the quarter ended October 2, 2009 of 46.3 million disk drive unit shipments, revenue of $2.66 billion, gross margin of 24.5%, net income of $179 million and diluted earnings per share of $0.35. The financial results for the quarter include $10 million of purchased intangibles amortization, $46 million of restructuring and a write down of long-lived assets of $64 million. The aggregate impact of these items is $120 million or approximately $0.23 per share.

During the first fiscal quarter, Seagate reduced short-term borrowings and long-term debt by approximately $465 million primarily with the maturity of its $300 million floating rate senior notes and by paying down its revolving credit facility by $150 million. Subsequent to the end of the first fiscal quarter, Seagate paid off the remaining balance of its revolving credit facility of $200 million and made open market purchases of $20 million, bringing the total debt reduction during fiscal 2010 to approximately $685 million. 

"At a time when economic conditions remained challenging we are very pleased with the company’s financial performance, delivering strong revenues, margins and cash generation," said Steve Luczo, Seagate CEO. "The company has returned to its operating model well ahead of our expectations of six months ago and now expects to sustain gross margin of 22-26%. Although mission critical enterprise demand in particular has yet to recover to historical levels, we benefitted from our time-to-market product delivery to customers integrating our notebook, desktop and enterprise drives." 

Business Outlook
While visibility has improved throughout the calendar year, the ongoing uncertainty in global economic conditions makes it difficult to predict product demand and other related matters, which makes it more likely that Seagate's actual results could differ materially from current expectations.

For the December quarter, the company is planning for the overall industry demand for disk drives to be 153 - 160 million units. As a result, the company expects revenue to be approximately $2.75 - $2.85 billion and gross margin as a percent of revenue to be near the high end of the company's targeted range of 22-26%. In today's financial results conference call, the company will also provide an update on current and expected business conditions, including key underlying assumptions, for its financial outlook for fiscal year 2010.

The December quarter outlook does not include the impact of any potential new restructuring activities, future mergers, acquisitions, financing, dispositions or other business combinations the company may undertake. The company's policy is to refrain from commenting on any such activities.