Seagate: Fiscal 1Q12 Financial Results

(in US$ millions)	1Q11	1Q12
Revenues	2,697	2,811
*Growth*		4%
Net income (loss)	149	140

Seagate Technology plc reported financial results for the quarter ended September 30, 2011.

The company shipped 51 million disk drives and reported revenue of $2.8 billion, gross margin of 19.5%, net income of $140 million and diluted earnings per share of $0.32.

On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported net income of $146 million and diluted earnings per share of $0.34 for the quarter ended September 30, 2011.

Additionally, Seagate returned $75 million to shareholders in the form of a dividend and repurchased $128 million of ordinary shares during the first fiscal quarter.

Acquisition of Samsung’s HDD Assets
The European Commission announced on October 19, 2011 that they have approved under the EU Merger Regulation, Seagate’s proposed acquisition of Samsung’s hard disk drive assets. The company will continue to work with other regulatory bodies to secure additional approvals in the coming weeks. Seagate believes the transaction will close by the end of calendar year 2011.

Dividend
The Board of Directors has approved a quarterly cash dividend of $0.18 per share which will be payable on November 18, 2011 to shareholders of record as of the close of business on November 3, 2011. The payment of any future quarterly dividends will be at the discretion of the Board and will be dependent upon Seagate’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the Board.

Comments

Abstracts of the earnings call transcript:

Steve Luczo, chairman, president and CEO:
"We lost approximately 3 points of market share on the September quarter for 3 primary reasons: one, we elected to not participate in aggressive pricing in the mission-critical market especially at a time when we were attempting to pass through cost associated with the rare earth increases; two, in the notebook market, we raised prices based on anticipated demand. However, these price increases unexpectedly dampened demand for our notebook products; and three, aggressive pricing in the Asia distribution channel caused us to lose some share, which was offset by gains in North America.
"The 1TB platter 3.5-inch desktop drive also lagged behind our initial plans and is now beginning the volume transition. We expect to ship millions of units on this platform by the end of the quarter.
"Upon completion of the acquisition, our product portfolio will include a market-leading notebook product from Samsung that delivers 500GB per platter in 1 and 2 disc configurations. We believe this is the industry's leading notebook platform, shipping approximately 4 million units in the September quarter.
"Prior to the [Thailand] flood, our TAM expectations for the December quarter was unconstrained demand for 180 million units, and Seagate expected to regain the market share lost in the September quarter.
"Based on our current assessment of the external component supply chain, we expect to ship between 40 million and 50 million units in the December quarter.
"We are constrained by the availability of specifically - of specific externally-sourced components. If these component constraints are resolved result by the end of the December quarter, we expect to exit the quarter with a production capacity of at least 60 million units for the March quarter, excluding any additional capacity from the Samsung acquisition. Assuming no component constraints, we would expect additional capacity of at least 10 million units associated with the Samsung acquisition."