Seagate Lowers Revenue Expectations amid Record HDD Unit Shipments

Seagate Shipped 66 Million Hard Drives in Q2 2012, But Failed to Achieve Desired Fiscal Results

by Anton Shilov
07/05/2012 | 07:31 PM

Seagate Technology on Thursday announced selected preliminary financial results for its fourth fiscal quarter of 2012, which ended on June 29, 2012. Although the company shipped record amount of hard disk drives during the quarter, it failed to achieve desired fiscal performance due to dropping prices on HDDs as the industry is rapidly recovering as well as due to a product issue that affected Seagate's enterprise products.

 

“Seagate expects to report another record quarter of revenue in the June quarter, however we did not meet our expected revenue and margin plan,” said Steve Luczo, Seagate chairman and chief executive officer.

Seagate expects to report record unit shipments for the June quarter of approximately 66 million, reflecting approximately 45 exabytes of storage capacity and maintaining approximately 42% market share. The company also projects to report record revenue of approximately $4.5 billion and non-GAAP gross margin of 33.6%. These preliminary results compare to Seagate's previous expectations for revenue of at least $5 billion and non-GAAP gross margin of at least 34.5%.

“The June quarter’s shortfall was due primarily to two factors. First, we did not achieve our planned market share growth as we reduced shipments in response to the industry’s faster than expected recovery from their supply chain disruption. Second, we experienced an isolated supplier quality issue that affected one of our enterprise product lines. This product issue impacted enterprise product unit shipments by approximately 1.5 million units and drove our non-GAAP gross margin below our targeted plan. While this disruption to our business was disappointing, we acted quickly and conservatively by suspending shipments of the affected products. We have resolved the issue and have resumed fulfilling our supply commitments to customers,” explained Mr. Luczo.

Seagate will report full fiscal fourth quarter 2012 financial results on Monday, July 30, 2012 after the close of the market.

“Based on the macro-economic concerns indicated by a broad base of customers, we are approaching the September quarter conservatively and aligning our business for a relatively flat addressable market and modest improvements in our product mix. We are adjusting our production and inventory planning accordingly, and we expect average selling prices and margins to remain relatively stable in the September quarter. We also continue to expect to exit the calendar year with non-GAAP gross margins exceeding 30%,” stressed the head of Seagate.