Word on the Street

Bear Stearns Downgrades Seagate Technology

Analyst Andrew Neff says the company's weak outlook and negative data points at margin could temper its near-term performance

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Seagate Technology (STX) posted third-quarter earnings per share of 53 cents. The storage company forecast $2.1 billion to $2.25 billion fourth-quarter revenue and 42-45 cents GAAP EPS, and $2.05-$2.08 fiscal year 2006 GAAP EPS. Bear Stearns downgraded the stock to peer perform from outperform.

Analyst Andrew Neff says the company's weak outlook and negative data points at margin, which, coupled with pending integration of Maxtor (MXO), could temper its near-term performance. He says margins were below expectation from a mix shift. Seagate saw more aggressive pricing in desktop hard disk drives (HDDs), and channel inventory rose from 3.8 to 4.8 weeks.

Neff cut his $2.09 fiscal year 2006 (ending June) EPS estimate to $2.06, $2.37 fiscal year 2007 to $2.09, and $2.91 fiscal year 2008 to $2.61. He trimmed his $34-$38 price target range to $28-$31.

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report.
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