Seagate Expects 4FQ16 Revenue Up 2% Q/Q and Down 9% Y/Y

Seagate Technology plc announced selected preliminary financial information for its fiscal fourth quarter and year-end 2016, which ended on July 1, 2016.

The company expects to report revenue of approximately $2.65 billion, gross margin of 25% and non-GAAP gross margin of approximately 25.8% for the fiscal fourth quarter 2016.

The company expects to report HDD unit shipments of approximately 37 million, reflecting approximately 62EB, average capacity per drive of 1.7TB and ASP per unit of $67 for the fiscal fourth quarter 2016.

These preliminary results compare to the company’s previous forecast for fiscal fourth quarter 2016 revenue of approximately $2.3 billion and non-GAAP gross margin of approximately 23%. The difference in the company’s revenue from its forecast was driven primarily by better than expected demand for the company’s HDD product portfolio.

The difference in the company’s gross margin from its forecast was driven by better than expected demand for the company’s enterprise HDD portfolio and cost containment execution. Non-GAAP operating expenses for the fiscal fourth quarter are expected to be approximately $440 million, in line with forecast expectations.

“The evolution of mobile and cloud data driven environments continues to define itself as requiring significant amounts of mass storage. HDD devices are where most data bits ultimately reside and our record HDD exabyte shipments in the June quarter, particularly due to enterprise demand, continue to support this thesis,” said Steve Luczo, chairman and CEO.

Luczo continued: “We believe the long-term trend of exabyte storage demand growth exceeding HDD areal density growth remains intact for the foreseeable future. Seagate will continue to evolve its product offering, technology investment and manufacturing footprint to best serve our customers with the world’s most advanced and cost advantaged HDD products.“

In addition to the company’s restructuring actions announced June 29, 2016, the company announced an additional restructuring plan for continued consolidation of its global footprint across Asia, EMEA and the Americas. The plan includes reducing the company’s global headcount by approximately 6,500 employees, or 14% of its global headcount by the end of fiscal year 2017. The total pretax charges for the plan will be approximately $164 million in fiscal year 2017. The restructuring activities and global footprint consolidation underway should enable the company to be operating within its targeted non-GAAP product gross margin range of 27-32% by the December 2016 quarter.