Seagate: Fiscal 2Q16 Financial Results

(in $ million)	2Q15	2Q16	6 mo. 15	6 mo. 16
Revenue	3,696	2,986	7,481	5,911
*Growth*		-19%		*-21%*
Net income (loss)	933	165	1,314	198

Seagate Technology plc reported financial results for the second quarter of fiscal year 2016 ended January 1, 2016.

For the second quarter, the company reported revenue of approximately $3.0 billion, gross margin of 24.8%, net income of $165 million and diluted earnings per share of $0.55. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported gross margin of 25.6%, net income of $246 million and diluted earnings per share of $0.82.

During the second quarter, the company generated approximately $382 million in operating cash flow, paid cash dividends of $188 million and repurchased approximately 2.9 million ordinary shares for $107 million. There were 296 million ordinary shares issued and outstanding as of the end of the quarter.

Cash, cash equivalents and short-term investments totaled approximately $1.3 billion at the end of the quarter.

“Our results this quarter reflect the achievement of many of our operational goals, including improved profitability in our product portfolio and effective cost controls,” said Steve Luczo, chairman and CEO. “Seagate sits in a favorable position as a leading storage solutions provider and we continue to believe that the long-term prospects for storage growth are strong. We are confident we have the right strategy and portfolio to continue delivering market-leading value to customers and generating strong returns for our investors through financial discipline.“

Comments

When the woldwide hard disk drive market is declining, financial figures of Seagate, Western Digitial are going down as today both of them have nothing to compensate their HDD business. This latter is supposed to get SanDisk to ameliorate the situation. Seagate has about nothing but a small activity in SSDs and storage subsystems following the acquisition of Dot Hill) and Xyratex.

Nevertheless, Steve Luczo, chairman and CEO, said: "Combined, we are planning for our cloud storage systems and silicon business to exit fiscal year 2016 at a revenue run rate of over $1 billion a year."

Seagate's 1FQ16 global sales are up 2% sequentially at $2,986 billion and decreased by as much as 19% yearly. Net income is five times greater Q/Q and 86% lower Y/Y.

The manufacturer shipped $45.9 million HDDs during the last three-month period. It's less (3%) that during the former quarter, less that the global market (7% at around 119 million), and far from one year ago (-19%). Total exabytes shipped into drives is up 9% Q/Q and down 1% Y/Y.

Enterprise, CE and branded drives were up sequentially, while notebook and desktop units declined 17% and 6% respectively as PC demand is declining.

Enterprise exabyte shipments were up 21% sequentially and average capacity per enterprise drive was a record of 2.2TB, up 15% year-over-year.

In the nearline market, the company begun the initial ramp of 10TB helium productS and is shipping 8TB conventional products in high volume.

All the main figures for the same last three-month period are in favor of Western Digital but the number of enterprise HDDs shipped thanks to HGST, the difference here being -14% (see table below).

Concerning the guidance, Luczo stated: "We believe overall storage market demand will be seasonally down in the March quarter which has ranged between 5% and 10% over the last five years. We are planning for revenue to be approximately $2.7 billion." Or down 10% quarterly and 37% yearly.

Seagate's HDDs from 4FQ13 to 2FQ16
(units in million)

Fiscal period

Enterprise

Desktop

Notebook

Branded

Total

HDD ASP

Exabytes

Average

HDDs

shipped

GB/drive

4Q13

8.2

18.6

16.1

6.1

4.8

53.9

$63

45.9

852

1Q14

8.1

19.1

17.2

6.2

5.1

55.7

$62

48.9

878

2Q14

7.8

19.2

16.9

6.7

6.2

56.6

$62

52.2

922

3Q14

7.7

19.8

16.4

5.4

5.9

56.2

$61

50.8

920

4Q14

7.4

18.4

16.8

5.1

4.8

52.5

$60

49.6

945

1Q15

8.8

18.7

20.2

6.0

5.7

59.5

$60

59.9

1,007

2Q15

9.1

16.0

19.7

6.1

6.0

56.9

$61

61.3

1,077

3Q15

9.1

14.3

16.8

4.8

5.1

50.1

$62

55.2

1,102

4Q15

8.2

11.9

14.6

5.8

4.7

45.3

$60

52.0

1,148

1Q16

7.8

12.4

16.4

5.5

5.2

47.2

$58

55.6

1,176

2Q16

8.1

11.7

13.6

6.2

6.4

45.9

$59

60.6

1,320

Seagate vs.WD for 2FQ16
(revenue and net income in $ million, units in million)

	Seagate	WD	% in favor of WD
Revenue	2,986	3,317	*11%*
Net income	165	251	*52%*
Notebook	13.6	15.3	13%
Desktop	11.7	12.5	7%
Branded	6.4	6.4	0%
CE	6.2	8.5	37%
Enterprise	8.1	7.0	-14%
Total HDDs	45.9	49.7	8%
Market share	40.0%	43.3%	3.3%
Average GB/drive	1,320	1,390	5%
Exabytes shipped	60.6	69.1	14%
HDD ASP	$59	$61	3%