Seagate: Fiscal 2Q10 Financial Results

(in US$ millions)	2Q09	2Q10	6 mo. 098	6 mo. 10
Revenues	2,270	3,027	5,302	5,690
*Growth*		+33%		*+7%*
Net income (loss)	(2.824)	533	(2.767)	712

Seagate Technology reported financial results for the
quarter ended January 1, 2010 of 49.9 million disk drive unit
shipments, revenue of $3.03 billion, gross margin of 30.5%, net income
of $533 million and diluted earnings per share of $1.03. The financial
results for the quarter include $10 million of purchased intangibles
amortization expense or approximately $0.02 per diluted share.

For the six months ended January 1, 2010 the company reported 96.2
million disk drive unit shipments, revenue of $5.69 billion, gross
margin of 27.7%, net income of $712 million and diluted earnings per
share of $1.38. The financial results for the six months ended January
1, 2010 include $20 million of purchased intangibles amortization
expense, $46 million of restructuring costs and a write down of
long-lived assets of $64 million. The aggregate impact of these expense
items is $130 million or approximately $0.25 per diluted share.

“Our strong financial performance in the December quarter was the
result of our ongoing progress in driving operational efficiencies, our
leadership position in high capacity, high performance products, an
improved product mix and the overall strength of demand for digital
storage,” said Steve Luczo, Seagate CEO.

Comments

Abstracts of the earnings call transcript:

Steve Luczo, chairman, president and CEO:

"First, the demand profile across our entire product line was linear throughout the quarter and we did not experience the dramatic decline during the last two weeks in the quarter as we did in the December 2008 quarter.
"Second, our assumption for enterprise storage demand proved to be conservative as demand accelerated throughout the quarter. Those two factors positively impacted our results in the December quarter.
"Third, we indicated that the Windows 7 refresh would likely accelerate PC demand. We do not believe there was a meaningful refresh cycle reflected in our Q2 results. However, we still expect this to be an opportunity for us throughout this calendar year.
"Fourth, we were not planning for a robust economic recovery in the United States or Europe during the quarter. We now expect a broader global economic recovery to occur in the second half of calendar year 2010 and we believe this recovery will result in a higher probability for a broad based commercial refresh of information technology products including storage devices."

Dave Mosley, executive VP,
sales, marketing and product line management:

"The TAM in the mission critical space for the December quarter was approximately 7.5 million units up 14% quarter-over-quarter and 8% year-over-year. Seagate shipped 4.6 million drives for mission critical server and storage applications during the quarter maintaining its leadership position. Mission critical drive shipments of 3.5 inch 15,000 RPM products were stronger than we anticipated throughout the quarter owing to an improving picture in enterprise storage systems.

"The TAM in the desktop market for the December quarter was approximately 64 million units, up 7% sequentially and 26% year-over-year. We believe we maintained our leadership position in this market shipping 25.1 million units, up 8% from the September quarter.

"The overall TAM in the mobile compute space was approximately 71 million units in the December quarter, up 10% sequentially and 53% year-over-year. Seagate shipped 14.8 million units, an increase of 7% sequentially and 95% from the year-ago quarter."

Pat O'Malley, CFO:

"For the March quarter the company expects the following: industry unit TAM of 155-160 million; revenue of approximately $2.9 to $3.1 billion; R&D and SG&A costs of approximately $340 million; other income expense of a net expense of approximately $35 million; a tax rate for planning purposes of 3%; an outstanding share count of approximately 530 million and GAAP earnings per share of $0.88 to $0.92 which includes approximately $0.02 in charges related to purchase intangibles amortization expense."