Seagate: Fiscal 4Q16 Financial Results

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Seagate is once more also hit by weak HDD global demand with quarterly revenue down Y/Y by 10% at $2.645 billion but with a little better last three-month results with sales up 2% Q/Q and back to profit.

Fiscal year revenue is $11.2 billion, down by 19% from 4FQ15. It's the fourth straight year of declining revenue for the company.

HDD shipments reached 36.8 million, down 9% from the prior quarter, and off 19% Y/Y, but representing a record 61.7EB of storage at a another record of $67 for ASP since the Thai floods.

HDD shipments over the last five fiscal years have decreased 15% while at the same time exabyte shipments have grown 112% and average capacity per drive is up 133%.

In FY16, 233EB were shipped with and average capacity per HDD up 29% Y/Y including 70EB for the business-critical product portfolio, up yearly 28%.

To avoid over capacity of production, the firm has reduced its manufacturing facilities but is accelerating the expansion of its Korat, Thailand plant.

Earlier this year, the HDD maker began the process of reducing the HDD manufacturing capacity from approximately 55 million to 60 million drives per quarter to approximately 35 million to 40 million drives per quarter. The actions required will be completed within the next six to nine months, according to the company.

In the nearline enterprise market, 8TB HDDs were the fastest growing products in units and revenue within its overall HDD portfolio this quarter and CEO Steve Luczo said: "We will be shipping our 12TB helium nearline enterprise test units for customer evaluation this quarter."

Luczo about next quarter: "Overall, I expect demand should improve in the September quarter with our focus on high capacity opportunities for our portfolio. Based on these factors, we expect revenue growth and gross margin improvement in the September quarter. We expect to achieve revenues of at least $2.7 billion in the September quarter, with gross margins of at least 27%, and relatively flat operating expenses."

With acquisition of SanDisk, WD is now a strong force in flash. Seagate historically did many acquisitions outside HDDs supposed to help to growth but all of them were a flop, representing only 8% of global revenue for the most recent quarter, at $199 million, the lowest figure since 1FQ15. And we don't see any serious strategy to compensate the continuing decrease of the HDD industry. Acquired firm Dot Hill will finally launched converged storage platforms, including hybrid and all-flash array offerings later this fiscal year, but competition here is huge with storage giants and aggressive start-ups.
 
Revenue by products in $ million

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

 
To read the earnings call transcript