by Anton Shilov
04/18/2012 | 10:46 PM
Seagate Technology on Tuesday reaffirmed its position as the world's largest maker of hard disk drives (HDDs). The company said that during its third quarter of fiscal 2012 (ended on March 30, 2012) it shipped record number of hard disk drives - 61 million - and reported record revenue of $4.4 billion.
Seagate reported revenue of $4.4 billion, gross margin of 37%, net income of $1.1 billion (up from $93 million in Q3 FY2011) and diluted earnings per share of $2.48. The company increased its HDD unit shipments by 29% over last quarter, supplying 61 million hard drives, which equates to approximately 42 exabytes. Samsung-branded products represented approximately 13% of Seagate shipments, or 7.93 million, in Q3 FY2012.
Record shipments, revenues and profits of Seagate were conditioned by several factors, including shortages of hard drives amid strong demand that exceeds supply after severe flooding in Thailand in October, 2011. Nonetheless, the company itself did a lot to boost output of own-brand drives from 49 million in Q3 FY2011 to 53.07 million in Q3 FY2012.
"Seagate delivered strong performance this quarter by concentrating our efforts toward supporting our customers as the recovery of the hard drive industry continues to progress. Importantly, during this challenging period, Seagate has successfully transitioned its portfolio to industry-leading products across all markets thereby positioning the company for continued leadership through operational excellence," said Steve Luczo, chairman, president and chief executive officer of Seagate.
It is necessary to note that Seagate forced numerous large customers to sign long-term supply agreements (LTAs) late last year in order to ensure stable pricing and shipments of HDDs going forward. In addition, the firm also auctioned certain batches of hard drives during the third quarter. As a result, Seagate managed to stabilize its margins and avoids price-wars for huge clients going forward.
"Our long-term agreements with our largest customers have been mutually successful and we delivered over 100% of our committed volume this quarter. The number of executed LTAs increased to 50% this quarter. We expect these long-term agreements to account for approximately 60% of our total production capacity for the calendar year. LTA pricing was more favorable to the customer than the company's average pricing, reflecting the benefit of longer-term visibility of supply and demand. Our new auction program continues to evolve and we held multiple auctions worldwide throughout the quarter, selling 100% of the products offered at or above the company's average pricing," explained Mr. Luczo.
Seagate expects at least $5 billion revenue and 34.5% gross margin in the fourth quarter of fiscal 2012.