Seagate Technology plc
) reported fiscal first quarter 2013 earnings per share (EPS) of
$1.45, falling way behind the Zacks Consensus Estimate of
Seagate reported revenues of $3.73 billion in the first
quarter of 2013, up 32.7% from $2.81 billion in the year-ago
period. The company's hard disk drive shipments into the client
market took a hit during the quarter and declined 12%
sequentially, which is more or less at par with the declines
faced by other technology companies.
The company also witnessed a weak enterprise market, which
moved down 26% on a sequential basis. Even after considering the
weak Enterprise market, Seagate's unit shipments increased by 14%
and average capacity per drive increased by 17% to 738
Gross profit was $1.06 billion up from $549.0 million in the
prior-year quarter. Gross margin was 28.4% versus 19.5% in the
prior-year quarter. The gross margin was benefited by better
pricing environment and cost savings from product transitions and
they are in line with other players from the same segment.
However, margins generated by the company's products at Brazil
were materially lower than the company's expectation, thereby
hurting the gross margin by 100 basis points.
Operating income in the quarter skyrocketed 164.4% year over
year to $624 million. This was a result of operating expenses
increasing at a slower pace than increase in revenue.
On a GAAP basis, net income was $582 million or $1.42 per
share, compared with $140.0 million or 32 cents per share in the
comparable quarter last year. Excluding the impact of one-time
items, adjusted net income was $594.0 million or $1.45 per share,
compared with $146.0 million 34 cents per share.
Balance Sheet, Cash Flow
Cash and cash equivalents were approximately $2.37 billion at
the end of the quarter versus $2.21 billion in the previous
quarter. Accounts receivables decreased to $1.68 billion from
$2.32 billion in the prior quarter. Seagate's long-term debt
remained flat at $2.867 billion. The company possesses strong
cash generation ability and generated $1.13 billion from
operating activities, down from $3.26 billion in the previous
quarter. STX has returned around 70.0% of operating cash to
shareholders through share repurchase.
Seagate reported modest first quarter result, with revenue
improving substantially but EPS falling short of our expectation.
Full recovery in the HDD industry and increasing demand will
position Seagate as the leading player in the market.
The company has been able to control costs and increase the
sale of high-margin products. Moreover, Seagate is coming up with
new products to woo customers and address other segments, and has
a significant exposure to high-end corporate desktop and
enterprise server markets compared to its rival
Western Digital Corp.
Moreover, PC demand is yet to pick up substantially and
increasing use of SSDs will continue to hamper the demand for
HDDs. Moreover, the Enterprise SSD market did not grow as per the
company's expectation, but did not impact margins negatively.
Currently, Seagate has a Zacks #3 Rank, implying a short-term
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