Seagate Technology Public Limited Company (STX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Seagate reported tepid fourth-quarter results wherein the bottom line matched the Zacks Consensus Estimate but the top line missed the same. Nonetheless, the company's traction with its new products focused on surveillance and analytics market and other hybrid drives remain the positives. Synergies from acquisitions and product innovations are the other growth catalysts. However, increased investment in new and innovative products, sluggish macroeconomic conditions and a flattish price environment, and competition from Western Digital and SanDisk remain the headwinds. Thus, we reiterate our Neutral recommendation on Seagate.

Overview:

Headquartered at Dublin, Ireland, Seagate Technology plc (STX) is one of the largest manufacturers of hard disk drives (HDDs). HDDs are used as the primary medium for storing electronic information in systems ranging from desktop computers and consumer electronics to data centers delivering information over corporate networks and the Internet. The company's HDDs address desktop, notebook PC, game console, PVR/DVR, and enterprise storage markets, among other HDD sub-segments. The company operates in an industry-leading vertically-integrated model with internal control over the majority of its key component suppliers. Seagate also develops other electronic data storage products such as SSD (solid state drive) and solid state hybrid drives (SSHD).

The company offers its products under three heads Enterprise Storage, Client Compute and Client non-compute. The company enhanced its position in SSDs with the acquisition of Samsung's HDD operations and the French drive maker, LaCie.

Seagate primarily sells to original equipment manufacturers (OEMs) but supplements this with sales through distributors and retailers. Major OEM customers include Dell, EMC, Hewlett-Packard, IBM and Sun Microsystems (acquired by Oracle Corp). In fiscal 2014, revenues from OEMs made up 68% of total revenue distributors generated 20% and retail accounted for the remaining 12% of the revenues.


In fiscal 2014, the company generated 54% of revenues from the Asia Pacific, 27% from America and the remaining 19% from Europe Middle East Africa (EMEA).

The disk drive market is highly competitive and witnesses frequent pricing pressure. Companies operating in this market compete to acquire a limited number of prime customers. Alternative kinds of storage, such as flash memory, tape, optical and SSDs further pressurize the key players, Seagate, Western Digital Corporation and Toshiba Corporation.


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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.



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As of 12/26/2014, 04:15 PM


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