Seagate Slumps in Pre-Market Trading as Outlook Misses Street’s Estimate (STX)
Shares of Seagate Technology Plc (NASDAQ: STX) plunged more than 5% in pre-market trading on Tuesday after electronic data storage products maker provided lackluster outlook for fiscal third quarter, citing weakness in global macroeconomic environment and dwindling PC market.
According to Market research firm, Gartner, worldwide PC sales shipments fell to 90.3 million units in the fourth quarter of 2012, underpinning the fact that more and more users are shifting towards smartphones and tablet computing. Dell Inc. (NASDAQ: DELL) just sold 37.6 million PCs globally in 2012, a 12.3 percent slump from the previous year’s shipments, a data provided by Gartner showed.
Seagate, which make hard disk drives and solid state drives for storing data inside computer, now expects fiscal third-quarter revenue to be in the range of $3.25 billion to $3.45 billion.
Analysts’ consensus estimate was for revenue of $3.48 billion, according to data compiled by Thomson Reuters.
Commenting over the results, Seagate’s Chief Executive, Steve Luczo, said to analysts and investors in a conference call, “Our business environment continues to be impacted by a wide range of macroeconomic, spending and demand challenges.”
The Company now in order to diversify its business and reduce reliance on drive business, announced on Monday that it has entered in an alliance with Virident Systems Inc., a startup.
Virident specializes on devices that plug into servers and store data on flash memory chips.
Seagate said it will start reselling Virident’s product lines and work with that company to jointly roll out new products.
According to the deal, Seagate will invest $40 million in Virident and take a seat on its board.
For the fiscal second quarter, Seagate reported net income of $492 million or $1.30 a share, down from $563 million or $1.28 a share, in the year earlier quarter.
Earnings on non-GAAP basis or adjusted earnings stood at $1.38 a share
Revenue during the period climbed 15% to $3.67 billion. Wall Street analysts had expectation of earnings of $1.33 a share on revenue of $3.58 billion.
Seagate’s manufacturing facilities in Thailand that were badly damage due to flooding in 2011 has now recovered.