David Einhorn
, founder of hedge fund Greenlight Capital, increased his holding
of Seagate Tech (
STX
) 58.99 percent at the average price of $22.75 on June 1,
according to
GuruFocus Real Time Picks
.
Ireland-based Seagate Technologies the world's leading provider
of hard disk drives based on revenue, which Einhorn has been
building a sizable position in recently. He originally bought
3,268,957 shares in the first quarter of 2011 at an average price
of $14 per share. In the second quarter he added 8,236,416 shares
at an average price of $16. In the third quarter he bought
2,943,600 shares at an average price of $13, and in the first
quarter of 2012 he bought 89,153 shares at an average of $25. His
most recent purchase on June 1 was of 8,575,900 shares and
brought his holding to a total of 23,114,026 shares.
Over the last year, Seagate's stock has gained 51 percent. In the
third quarter ended March 30, 2012, the company had revenue of
$4.5 billion, shipping 60.7 million units with an ASP of $73 per
unit. This was up from $2.7 billion the previous year due to
higher volumes including its first full quarter of
Samsung-labeled HDD products, and benign price erosion. Seagate
bought Samsung's hard drive business in December 2011 for $1.4
billion.
The company also reported net income of $1.1 billion, up from $93
million in the third quarter of 2011, and marking its fourth
consecutive quarter of earnings growth. Gross margins expanded to
36.9 percent, from 19.1 percent the previous year, and also
marking its fourth consecutive quarter of gross margin expansion.
"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."
David Einhorn
commented on Seagate Technologies in
his first-quarter letter
:
"Seagate Technology (
STX
) was the other significant winner during the quarter. It is
STX's normal practice on earnings calls to provide financial
commentary looking ahead only one quarter. However, in January,
STX shared its financial outlook for all of calendar year 2012,
forecasting revenues of $20 billion. The prior consensus was for
less than $15 billion. A good chunk of the increased forecast
comes from higher pricing enabled by the industry shortage
following the floods in Thailand last year.
STX also announced that it would be using some of its excess cash
to ramp up its stock repurchase program, with a target of
decreasing outstanding shares by 25%. When business conditions
eventually normalize, the lower share count will enable STX to
generate higher earnings per share.
Though the shares advanced from $16.40 to $26.96 during the
quarter, the share price remains at a very low multiple of both
near-term and longer term earnings. Based on our somewhat more
conservative revenue outlook in 2012, we expect earnings to reach
$10-$15 per share this calendar year, before settling at an
average of about $5 per share in future years when the industry
shortage will have ended."
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