Seagate Reiterated at Neutral - Analyst Blog

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We reiterate our Neutral recommendation on Seagate Technology plc ( STX ) post its first-quarter results wherein both the top and bottom lines declined year over year.

Why the Reiteration?

Seagate did not fare well in the first quarter due to the lack of visibility in the hard disk drive (HDD) industry and declining price environment. Despite the ongoing cost control measures, the company has not been able to support its margins.

Nonetheless, we believe that with an enriched product portfolio and higher mix of original equipment manufacturer (OEM) business, Seagate will benefit in the long run. Moreover, the storage solutions provider is coming up with customized products to cater to new customers and gain traction in the storage markets.

Moreover, Seagate has expanded its solid state drive (SSD) portfolio and has made investments in the fast evolving PCIe (Peripheral Component Interconnect Express) storage market. The company has also introduced thin hybrid drives to cater to the increasing demand of the mobile market.

Additionally, the company's focus on the enterprise segment is also expected to boost its prospects over the long term. Exponential growth in data storage in the cloud signals potential acceleration in cloud deployments by the end of 2013. Therefore, Seagate is investing heavily in high-capacity storage devices that would support expansion of cloud infrastructure and cloud applications. Apart from this, the focus shift toward enterprise would reduce Seagate's dependence on the PC market.

However, Seagate faces stiff competition from Western Digital ( WDC ), Hitachi, Samsung and Intel in the storage market and from SSD pureplays such as SanDisk, Micron ( MU ) and Fusion-io. According to Trendfocus, in the third quarter of 2013, Seagate's HDD market share declined sequentially to 39.7% from 40.4% compared to a marginal decline in Western Digital's market share (44.7% from 44.9%) over the same period of time.

Additionally, pricing pressures, customer concentration and a declining PC market are the other headwinds for the company.

Currently, Seagate has a Zacks Rank #3 (Hold). Investors may also consider SanDisk ( SNDK ) which sports a Zacks Rank #1 (Strong Buy).



MICRON TECH (MU): Free Stock Analysis Report

SANDISK CORP (SNDK): Free Stock Analysis Report

SEAGATE TECH (STX): Free Stock Analysis Report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MU , SNDK , SSD , STX , WDC

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