Seagate Q2 Profit Down; Shares Slip 6%

(RTTNews) - Hard disk drive maker Seagate Technology plc (STX), Monday reported a drop in profit for the second quarter, as revenues slipped reflecting lower demand for drives amidst weak PC sales. Both earnings and revenues for the quarter fell short of Wall Street expectations, sending shares of Seagate down six percent in extended trade.

Dublin, Ireland-based Seagate's second-quarter profit dropped to $428 million or $1.24 per share from $492 million or $1.30 per share last year.

Adjusted earnings for the quarter were $455 million or $1.32 per share. Analysts polled by Thomson Reuters estimated earnings of $1.38 per share for the quarter. Analysts' estimates typically exclude special items.

Seagate's revenue for the second quarter dropped to $3.53 billion from $3.67 billion last year. Analysts estimated revenues of $3.56 billion for the quarter.

Gross margin, or percentage of revenues left after deducting production costs, advanced to 28.0 percent from 27.0 percent last year. Operating expenses rose to $543 million from $437 million last year.

Commenting on the results, Chief Executive Steve Luczo said, "Seagate's results in the December quarter reflect discipline in managing the profitability of our business and strong operational execution. We continue to strategically invest in our product portfolio and enhance our vertically integrated manufacturing capabilities to effectively capitalize on the cloud, mobile and open source storage trends that are being fueled by data growth."

Seagate, like its rival Western Digital Corp. (WDC), have diversified its business and turned its focus on to cloud, mobile and open source storage business, with the industry negatively impacted by slowing sales of PCs and notebooks as customer preference shifts to smartphones and tablets, which does not require hard drives.

According to market research firm Gartner Inc. (IT), worldwide PC shipments fell 6.9 percent to 82.6 million units in the fourth quarter, marking the seventh consecutive quarter of decline.

Nonetheless, Western Digital last week reported its second-quarter profit rose 28 percent to $430 million on revenue growth of 4 percent.

Seagate also declared a quarterly dividend of $0.43 per share, payable on February 24 to shareholders of record on February 10.

STX closed Monday's trading at $58.05, down $0.52 or 0.89%, on the Nasdaq. The stock further dropped $3.37 5.81% in after-hours trade.