The Channel logo

News

By | Chris Mellor 8th April 2011 15:12

Ex-top disk dog down in the revenue dumps

Pays dividend to keep shareholders happy

Seagate has announced preliminary third quarter results 11.5 per cent lower than a year ago, with 1.3 million fewer disk drives shipped, but announced it is going to begin making dividend payments. Happy investors have boosted its shares by 9.12 per cent to $16.03.

Seagate said for its third fiscal 2011 quarter, ending April 1, it expects to report revenues of $2.7bn, which compares poorly to the $3.05bn reported in fy2010's third quarter. Gross margin should be towards the high end of expectations.

The second 2011 quarter also saw $2.7bn in revenue – so Seagate is flatlining on a sequential comparison. It shipped 49 million drives in the third 2011 quarter; 48.9 million in the second; and 50.3 million in 2010's third fiscal quarter. This shipment pattern echoes the revenue pattern.

These are poorish figures, but good in terms of Wall Street expectations. The company's announcement that it would pay a dividend of $0.18/share was a pleasant surprise to investors and the shares have been risen.

This marks the beginning of a transition for Seagate from industry leader to industry number two behind the combined Western Digital-Hitachi GST operation. Seagate knows it has little chance of catching up with the WD-HGST business and, inside the company, we are hearing whispers that this may be related to that dratted legacy bequeathed by departed CEO Bill Watkins.

Still, Seagate is the undisputed – and effectively unchallenged – number two in the industry, with a strong set of products and more to come. Its status isn't threatened by WD-HGST in the next few years as the storage industry relies on dual-sourcing. In fact it could pick up some business as WD-HGST condenses down to a working combination and gets rid of overlapping products.

We understand Seagate chairman and CEO Stephen Luczo is spending three months in the Far East. Why? We also note this sentence in Seagate's earnings and dividend press release: "The preliminary results for the fiscal third quarter do not include the impact of any potential new restructuring activities, future mergers, acquisitions, financing, dispositions or other business combinations the company may undertake."

Hello? Was that a blip or two we heard on the Seagate radar screen? One thing is for sure: there's never a dull moment with Seagate. ®

comment icon Read 3 comments on this article alert Send corrections

Opinion

Chris Mellor

How long before Blue Big HQ pulls the plug on the whole thing?

Chris Mellor

Drives nails forged with Red Hat iron into VCE's coffin
Sleep Cycle iOS app screenshot

Trevor Pott

Forget big-spending globo biz: it's about the consumer... and he's desperate for a nap

Features

Windows 8.1 Update  Storeapps Taskbar
Chinese Buffet self-service
Chopping down the phone tree to scrump low-hanging fruit
An original member of the System/360 family announced in 1964, the Model 50 was the most powerful unit in the medium price range.
Big Blue's big $5bn bet adjusted, modified, reduced, back for more
Microsoft CEO Satya Nadella
Redmond needs to discover the mathematics of trust