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By | Drew Cullen 25th October 2006 00:36

Seagate slams profit-ignorant rivals

Knocks out 39m hard drives in Q1

Seagate gave itself a pat on the back today in its September quarter report for holding the revenue line against hard drive competitors "who seem intent on trying to capture market share without regard to profitability". Fighting fire with fire , Seagate is determined to retain market share, and that will mean more price cuts.

In the September quarter, the average selling price (ASP) for Seagate drives fell $4.00 from the June quarter. Like-for-like products fell more than six per cent during quarter - no surprise here to Seagate which expected as much at the start of Q1.

But record shipments made up for lower ASPs - the company kncked out 37 million units during the quarter, of which 3.9 million were based on perpendicular recording technology. For the three months ended 29 September, Seagate's fiscal Q1,2007 - revenue was $2.8bn and net income was $59m. The results include a $344m contribution from Maxtor, its recently acquired rival, and $82m acquisition costs.

Noting aggressive prices for notebook and desktops, Bill Watkins, Seagate CEO, claimed a strong performance for the September quarter. "I'm pleased, particularly in the face of this environment, with the revenue retention we have achieved," he said, "and we are confident in our ability to continue to reduce cost and improve profitability throughout the year... Moving forward, while we remain committed to pricing discipline, we intend to maintain our current share position, and will manage our pricing strategy accordingly."

With cheaper Maxtor-branded hard drives coming on stream, Seagate will play hard in the PC mass market, while - it hopes - keep its profits pecker up in the enterprise / server market. This should bear fruit in the second half of the financial year, Seagate says. In the meantime, it expects price wars to continue. In light of this, it has adjusted revenue and earning guidance for the full year. It now expects $11.4bn-$11.8bn in revenue and GAAP-friendly income of $1.35-$1.45 per share. ®

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