Seagate Cuts Shipments Forecast Amid Market Uncertainties

Seagate to Ship 43 Million Hard Drives This Quarter

by Anton Shilov
11/28/2011 | 09:57 PM

Seagate Technology on Monday updated its financial outlook for the December 2011 and March 2012 quarters. The company reduced both its own and total available market (TAM) predictions due to shortages of components for hard disk drive (HDD). Seagate continues to believe that, due to the industry impacts caused by the flooding in Thailand, HDD supply will be significantly constrained for several quarters.

 

For the quarter that ends in December, 2011, the company believes the industry will ship between 110-120 million units. For the Q4 2011 quarter, the company now expects unit shipments of approximately 43 million units and revenue of approximately $2.8 billion. Previously, Seagate expected to ship between 40 million and 50 million HDD units during the quarter.

Gross margin as a percent of revenue is expected to be 150-300 basis points above the high-end of the company’s long-term, targeted gross margin range of 22% - 26%. Operating expenses (R&D and SG&A) are expected to be approximately $400 million.

Seagate's component and disk drive factories in Thailand have not been directly affected by the flood; however, the company’s ability to manufacture hard disk drives has been impacted due to external component supply constraints as first disclosed on October 12, 2011.

The company believes the industry’s ability to manufacture and ship hard disks drives will gradually improve throughout calendar 2012. While this may alleviate some of the unit demand shortfall, it is expected that some companies will optimize unit shipments by manufacturing lower component count/lower capacity hard disk drives; thereby, only modestly offsetting the growing petabyte shortage. Because demand is estimated to significantly exceed supply during this time, pricing is expected to remain stable.