Bloomberg News

Seagate Gains After Withstanding Floods, Beating Estimates

December 01, 2011

(Updates shares with closing price in fifth paragraph.)

Nov. 29 (Bloomberg) -- Seagate Technology Plc rose after the company forecast higher sales than analysts had estimated, saying it withstood flooding in Thailand better than much of the disk-drive industry.

Seagate, the world’s largest maker of computer drives, will ship 43 million units in the December quarter, generating about $2.8 billion in revenue, according to a statement yesterday. Analysts had projected sales of $2.64 billion, based on data compiled by Bloomberg.

While the Thai floods will crimp supplies of components, Seagate’s own factories in the country haven’t been affected by the disaster, the company said. Two of Seagate’s biggest competitors, Western Digital Corp. and Toshiba Corp., have major plants in the flood zone. In an interview this month, Seagate Chief Executive Officer Steve Luczo said he could raise prices 40 percent; instead, he’s offering increases of 20 percent to customers that commit to one- to three-year contracts.

“Seagate is taking this situation and trying to create long-term good for the company,” said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco, who has an “outperform” rating on the shares. “The equipment they have, they’re just running everything 100 percent. There have been people scurrying for drives.”

Seagate gained 3.7 percent to $16.58 at the close in New York. The shares are up 10 percent this year.

Profit Margins

Seagate’s gross profit margin will be at least 1.5 percentage points higher than the company’s long-term goal of as much as 26 percent, the company said.

The floodwaters that have engulfed much of the industrial heartland north of Bangkok have spared both of Seagate’s sprawling Thai factories. Still, Luczo said the drive industry wouldn’t recover until at least the end of next year because specialized component and chemical suppliers were swamped.

Seagate said yesterday it expects the industry to improve gradually over the course of 2012. In the March quarter, the company’s revenue will be about $3.75 billion, Seagate said. Analysts had projected $3.21 billion, according to Bloomberg.

--With assistance from Peter Burrows in San Francisco. Editors: Nick Turner, Marcus Chan

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus