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By | Chris Mellor 23rd October 2008 09:15

Seagate earnings slump 83%

Blood on the tracks

The economic crisis has slammed into Seagate's quarterly earnings, with the storage company suffering an 83.1 percent drop in net income.

Several recent earnings reports from storage companies signal a downturn - EMC, Imation, QLogic and Sun for example. Seagate is now following suit.

For its first fiscal 2009 quarter to the end of September Seagate's revenues were $3.03bn, down 8.2 per cent from last year's $3.3bn with 48 m drives shipped compared to the number a year ago of 47 million. Despite the extra million drives Seagate's net income fell from $355m ($0.64) in Q1 fy08 to $60m ($0.14) this quarter.

Seagate boss Bill Watkins said that net income was $71m ($0.14 per share) down due to amortisation of intangibles and charges for acquisitions and restructuring. He's now talking of being well-positioned for the future, an acknowledgement that the next few quarters could be bloody.

“With a strong balance sheet, Seagate is operating from a position of strength. Looking forward, in the face of a challenging macro-economic environment, we will focus on cost controls and inventory management while continuing to invest in the key technologies that will solidify product leadership. As a result, we remain highly confident in our ability to convert the long-term growth in demand for storage into superior value for our shareholders.”

For the December quarter, Seagate expects to report revenue of $2.85bn to $3.05bn, and diluted net income per share of $0.12 to $0.16 (net income of $60m - $80m).

This compares to last year's $3.4bn revenues and net income of $403m or $0.73 per share based on 50 million drives shipped. So Seagate is probably expecting to ship fewer drives and have another 80 per cent plus drop in net income on a quarterly basis. Let's hope it doesn't get worse than that. ®

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