Seagate Technology Inc’s fourth-quarter results reflected the continued downturn in the disk drive market as the Scotts Valley, California-based company posted net income of $1.02bn, or $4.11 per share, on revenue up 4.3% at $1.64bn. Net of $1.67bn in pre- tax gains associated with the sale of Seagate Software’s NSMG network and storage management group to Veritas Software Corp, earnings were just $0.30 per share, missing already lowered expectations by $0.04. Net income for the year-ago quarter was $22m, or $0.09 per share, while the immediately prior quarter saw earnings of $82m ($0.34).
Before the company issued a profit warning last month (CI No 3,692), Wall Street had been expecting earnings of $0.45 per share on a pro forma basis. At that time, the company projected earnings in the range of $0.32 to $0.37. Seagate says the quarter was a mixture of disappointment and reality hit internally by missed opportunities and sales execution problems and externally by continued pricing pressure that led to lower average unit prices in the desktop segment of the business. The company also cited mix and volume issues, as well as supply chain management problems for its current woes.
The company shipped 8.29 million drives during the quarter and managed to increase its market share about 1.5% in the desktop segment, while losing about half a point in the high-end market. Desktop drives accounted for $578m in revenue, while high-end products brought in $895m. Sales of storage products represented $79m in revenue, while software was good for $75m. Overall gross margins were 22.5%, while software gross margin was 81.8%. For the full year, net income was $1.18bn against a loss of $530m, on revenue that was essentially flat at $6.8bn.
Looking ahead, Seagate says it will work on fixing the supply chain problems over the next couple of quarters and expects to see continued unit growth throughout fiscal 2000. Market share, which is currently viewed as the paramount issue in the disk drive sector, is also expected to be maintained or grow. Despite those positives, revenues are expected to be flat due to pricing pressure. Margins will likely be down next quarter, but the company says that could well be offset by improvements in manufacturing efficiencies. All in all, management expects to have a profitable year ahead, net of any charges it may have to take to deal with market issues – although it declined to provide any specific guidance on the bottom line and gave no hints about what actions might lie ahead. á
