Seagate 2Q profit jumps by $263 million

SAN FRANCISCO - Fueled by insatiable consumer and business demand for storage, hard-drive maker Seagate Technology's fiscal second-quarter earnings nearly tripled as shipments rose 20 percent year over year, the company said Thursday.

Seagate Chief Executive Officer Bill Watkins said the company couldn't meet demand in every segment of its business during the quarter, and he predicted his industry — which supplies the storage components in everything from computers and gaming consoles to digital video recorders — will continue to see robust demand.

"None of us are seeing the macroeconomic impacts on the storage business," Watkins said in a phone interview. "Consumer spending numbers for the U.S. were poor — people weren't buying dresses or new homes — but they were buying electronics."

For the quarter ended Dec. 28, the world's largest drive maker earned $403 million, or 73 cents per share, up 188 percent from $140 million, or 23 cents per share, in the year-earlier quarter.

Excluding special items, Seagate said it would have earned 76 cents per share for the period. Analysts polled by Thomson Financial expected adjusted earnings of 75 cents per share.

Revenue rose 14 percent to $3.42 billion from $3 billion in last year's second quarter, falling short of analyst expectations of $3.49 billion.

The company reported disk drive unit shipments of about 50 million for the quarter. Company officials said in a conference call with analysts Thursday that Seagate likely could have shipped even more had they ramped up more quickly to release a 250-gigabyte hard drive for laptop computers. The notebook drive was released toward the end of the quarter when competitors were already shipping what had become a popular drive that quarter for PC makers.

But Seagate officials said they expect overall demand to remain strong and forecast Seagate's sales would increase by about 15 percent in its fiscal third quarter. But, Watkins said, "with all the noise of a recession, we just want to be conservative."

For its third fiscal quarter, Seagate predicted income of 57 cents to 61 cents per share on revenue of $3.2 billion and $3.3 billion. Excluding about $27 million in one-time items, Seagate predicted earnings will fall between 62 cents to 66 cents per share. Analysts were expecting adjusted earnings of 62 cents per share on sales of $3.3 billion in the company's fiscal third quarter.

Shelby Seyrafi, analyst at Caris & Co., agreed with Seagate's assessment of a somewhat tougher quarter ahead with competitive pricing battles that will reduce gross margins.

"The good times are over for now because of the economy," Seyrafi said.

Shares of Seagate closed at $21.60, down $1.38 or about 6 percent, and they shed another 52 cents or 2 percent in after-hours trading following the release of the quarterly report.

Seagate is based in the Cayman Islands but operates out of Scotts Valley, Calif.