Seagate: Fiscal 3Q12 Financial Results

(in US$ million)	3Q11	3Q12	9 mo. 11	9 mo. 12
Revenues	2,695	4,450	8,112	10,457
*Growth*		65%		*30%*
Net income (loss)	93	1,146	392	1,849

Seagate Technology plc reported financial results for the quarter ended March 30, 2012.

The company reported revenues of $4.4 billion, gross margin of 37%, net income of $1.1 billion and diluted earnings per share of $2.48. On a non-GAAP basis, which excludes the net impact of certain items, it reported net income of $1.2 billion and diluted earnings per share of $2.64.

The company generated approximately $938 million in cash from operations, paid cash dividends of $112 million and used approximately $1.1 billion to repurchase 43.1 million shares of common stock and for the early retirement of debt.

"Seagate delivered strong performance this quarter by concentrating our efforts toward supporting our customers as the recovery of the hard drive industry continues to progress," said Steve Luczo, chairman, president and CEO. "Importantly, during this challenging period, Seagate has successfully transitioned its portfolio to industry-leading products across all markets thereby positioning the company for continued leadership through operational excellence."

The board of directors has approved a quarterly cash dividend of $0.25 per share, which will be payable on May 17, 2012 to shareholders of record as of the close of business on May 2, 2012. The payment of any future quarterly dividends will be at the discretion of the board and will be dependent upon Seagate’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the Board.

Comments

Seagate is probably back as the number one HDD manufacturer with revenues of $4,450 million for the quarter and shipping 61 million units, up 29% sequentially and up 25% compared to the year ago quarter.

That's its first financial results including acquired Samsung HDD activity.

Thailand flood finally helps the company to be more successful than most of its competitors, increasing prices and margins.

Following its most recent fiscal three-month period ended December 30, 2011, WD expected for its March quarter to ship between 31 million and 33 million drives with sales in the range of $2 billion to $2.15 billion, all these figures being around half of Seagate's ones.

Seagate shipped 1,000 drives per employee and exited the quarter building approximately ten drives per second. WW employees increase from 53,010 to 57,145 sequentially (+8%) with the addition of Samsung's HDD workforce.

Shipments by type of HDDs for the quarter:

Desktop: 23.7 million (39%)

Mobile: 20.1 million (33%)

Enterprise: 7.4 million (12%)

CE: 6.9 million (11%)

Branded: 2.7 million (4%)

By channel:

OEM: 73%

Distribution: 21%

Retail: 6%

earnings call transcript

Steve Luczo, chairman, president and CEO:

"We increased our unit shipments by 29% over last quarter, shipping 61 million drives, which equates to approximately 42 exabytes. Shipments of our client products improved, with the notebook market almost fully recovered, as expected. We expect the market for desktop drives to remain constrained, most likely through the fall. In the enterprise, the mission-critical market segment market seems to have almost fully recovered, while business-critical continues to be constrained as demand for storage continues to increase rapidly with the ongoing build out of the cloud infrastructure.
"Our Samsung label products represented approximately 13% of our shipments this quarter. (…) We are very pleased with the value this business has brought to Seagate. We have increased manufacturing capacity and have successfully increased our additional design engineering headcount by over 25% at our Korean design center since the acquisition was completed.
"Distribution pricing remains well above historical spreads with respect to OEM pricing.
"Consistent with industry analyst projections, we believe that the June quarter TAM will be approximately 160 million units. Given these dynamics, the pricing environment remains benign and we are raising our non-GAAP gross margin expectation to be at least 34.5% for the June quarter. We expect to achieve revenue of at least $5 billion and operating expenses of approximately $400 million to $500 million.
"For the second half of the calendar year, we are planning that the industry will continue its current pace of recovery, and combined with the demand for cloud infrastructure and the introduction of Win 8 and new thin and light notebook products, the December quarter TAM should exceed 185 million units. Under these conditions, we believe Seagate will maintain market share of approximately 43% and will be on track to achieve calendar 2012 revenues of at least $20 billion. In addition, we are planning for non-GAAP gross margins to remain above 30% exiting calendar 2012."