Seagate Raises Fiscal 4Q09 Guidance

Seagate Technology announced an update to its expected financial results for its fourth fiscal quarter of 2009, which ends July 3, 2009. Additionally, the Company issued initial planning assumptions for its first fiscal quarter of 2010, which ends on October 2, 2009.

Specific to the June 2009 quarter:

– Unit demand and pricing for the Company’s products, in aggregate, are tracking favorably as compared to the outlook the Company provided on April 21, 2009
– Improved operational efficiencies, product management and the continuing successful transition to the Company’s new products, which is allowing the Company to optimize product mix and gross margin
– Company and industry channel inventory continue to be below historic levels
– As such, the Company now expects:

• The total available market (the TAM) for hard disk drives to be approximately 120 million units, or slightly higher, versus our original assumption of 114 million units
• Revenue of approximately $2.20 – $2.30 billion
• Gross margin as a percent of revenue of approximately 15%
• Product Development, Marketing and Administrative costs are expected to be $335 million

Relative to the September 2009 quarter,
the Company for planning purposes is assuming:

– The overall TAM for hard disk drives is expected to increase seasonally by approximately 6% to 8% with the exception of the enterprise market which will be flat compared to the June quarter
– Supply and demand will be in relative balance, therefore price declines will be similar in nature to the June quarter
– As such, the Company is planning for:

• Revenue of approximately $2.35 – $2.50 billion
• Gross Margin as a percent of revenue will improve to approximately 18%, which is ahead of plan due to improved operational efficiencies and product management, and reaches the low end of the Company’s targeted range of 18% – 24%
• Product Development, Marketing and Administrative costs will be $315 million
• Tax provision of approximately 6%

"The operational and financial performance improvements we have delivered over the last few months are encouraging," said Steve Luczo, Seagate chief executive officer. "We are making successful transitions to our newer, more cost effective and more competitive products. We are returning to our technology leadership position, as evidenced by our time-to-market position with 640GB 2.5-inch and 2TB 3.5-inch products. This progress combined with improved operational efficiencies and product management is accelerating our path to profitability."