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Seagate Technology PLC (STX)

F1Q2011 (Qtr End 10/01/10) Earnings Conference Call

October 20, 2010 5 PM ET

Executives

Steve Luczo – Chairman, President & CEO

Pat O’Malley – EVP & CFO

Dave Mosley – EVP, Sales, Marketing and Product Line Management

Bob Whitmore – EVP & Chief Technology Officer

Larry Sonsini – Wilson, Sonsini, Goodrich & Rosati

Analysts

Keith Bachman – Bank of Montreal

Mark Moskowitz – JPMorgan

Katy Huberty – Morgan Stanley

Ben Reitzes – Barclays Capital

Rich Kugele – Needham and Company

Sherri Scribner – Deutsche Bank

Aaron Rakers – Stifel Nicolaus

Kevin Hunt – Hapoalim Securities

Jason Nolan – Robert W. Baird

Presentation

Operator

Good afternoon ladies and gentlemen and welcome to Seagate Technology’s Fiscal First Quarter 2011 Financial Results Conference call. My name is Stacey and I’ll be your coordinator for today.

At this time all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded for replay purposes. This conference call contains forward-looking statements including, but not limited to statements related to the company’s future operating and financial performance in the December 2010 quarter and thereafter, and includes statements regarding customer demand for disk drives and general market conditions.

These forward-looking statements are based on information available to Seagate as of the date of this conference call, but are subject to a number of risks and uncertainties and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements.

Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company’s Annual Report on Form 10-K and Form 10-K/A as filed with the US Securities and Exchange Commission on August 20, 2010 and October 6, 2010 respectively.

These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent date and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made

I would now like to turn the conference over to our host to Mr. Steve Luczo, CEO. Please go ahead.

Steve Luczo

Thank you, Stacey. Good afternoon everyone and thanks you for joining on the call today, sorry about the delay. On the call with me from Seagate are Ken Massaroni, our General Counsel, Pat O’Malley, our Chief Financial Officer; Bob Whitmore, our Chief Technology Officer and Head of R&D and Manufacturing Operations and Dave Mosley, Executive Vice President of Sales, Marketing and Product Line Management.

Also on the call today are Larry Sonsini of Wilson, Sonsini, Goodrich & Rosati and Joe Perella of Perella Weinberg Partners. Today, we are continuing with the new format that we began last quarter and we have posted detailed supplemental information about the quarter on our Investor Relations website.

Due to the announcement we made on October 14th, 2010 concerning the preliminary indication of interest regarding a going private transaction, there are some additional requirements with respect to today’s call. First, the company will not at this time be providing any additional information regarding the aforementioned announcement.

Second, in order to comply with regulatory requirements, the company will not provide, discuss or answer questions regarding the outlook for the December quarter or any future fiscal periods. And, finally, the company will not be participating in individual meetings with investors or analysts either in-person or via conference call until further notice, again due to the regulatory requirements.

Seagate entered the September quarter with the following key assumptions for planning purposes. First, that we would not see any additional slowdown in consumer spending on technology generally. Second, that we would hold the market share levels of approximately 30% with which we entered the quarter. Third, that we would not see attempts by competitors to ship share through aggressive pricing. Fourth, that inventory on hand would remain flat quarter-over-quarter. And, finally, that the corporate technology refresh that we had been experiencing going into quarter would continue.

We did experience some additional weakness in the consumer markets particularly in the United States and in Europe early in the quarter. Primarily as a result of this weakness, the total available market for the quarter was approximately 165 million units, which was the low end of our expectations at the beginning of the quarter. We did however see some early signs that consumer activity is beginning to improve in early September. Additionally, industry market share remains substantially unchanged. However, pricing remained aggressive across all of our product lines, customers, and geographies.

As noted in the Western Digital conference call yesterday, the week 13 industry shipments in the September quarter were significantly higher than the prior 12-week average. While we believe this to be an accurate description overall, Seagate was under represented during week 13 and week 12 as compared to a level of the first 11 weeks of the quarter. Dave Mosley can provide more details during the Q&A session if required.

Turning to our September quarter results, we reported first fiscal quarter revenue of $2.7 billion in non-GAAP diluted earnings per share of $0.37 on shipments of 49.2 million units. Gross margin of 20.4% was below our target range due to the aforementioned market dynamics, which impacted our ability to deliver earnings within the target range we provided at the beginning of the quarter.

Our balance sheet remains strong. Cash, cash equivalents, short-term investments, and restricted cash totaled $2.2 billion. Long-term debt include current portion was reduced by $328 million to $2.2 billion at the end of the quarter with the redemption of the Maxtor convertible notes.

Read the rest of this transcript for free on seekingalpha.com