Seagate Technology cuts Q4 revenue outlook
Published: 08:00 06 Jul 2012 EDT
Hard-drive maker Seagate (NASDAQ:STX) late Thursday warned that fiscal fourth-quarter revenues will come in well below expectations, revising its estimate to about $4.5 billion from the prior $5 billion target.
The company cited an "isolated supplier quality issue" which affected one of its enterprise product lines as well as lingering effects from supply-chain disruptions. Much of the hard-drive industry was impacted by storms and flooding last year in Thailand, a manufacturing hub for the components.
"While this disruption to our business was disappointing, we acted quickly and conservatively by suspending shipments of the affected products. We have resolved the issue and have resumed fulfilling our supply commitments to customers," Seagate CEO Steve Luczo said.
The name of the supplier wasn’t disclosed, but Luczo said this "impacted enterprise product unit shipments by approximately 1.5 million units and drove our non-GAAP gross margin below our targeted plan."
As part of its revised quarterly forecast, Seagate projected gross margin would be 33.6 per cent on an adjusted basis, narrower than the 34.5 per cent that management had been looking for previously.
The company has since resolved the issue and resumed filling orders. Full financial results will be reported July 30.
Luczo also said the September quarter could also be tough as he said the company was approaching the period "conservatively" due to macroeconomic concerns, with plans for a flat addressable market and "modest" improvements in product mix.
Average selling prices and margins should remain relatively stable, Mr. Luczo said, and Seagate should still exit the year with adjusted gross margins above 30 per cent.
Shares of Seagate sank 3 per cent to $24.34 in after hours trading. Rival Western Digital Corp. (NASDAQ:WDC) declined 3.5 per cent to $29.60.
Many analysts have cut their estimates for the hard-disk drive makers of late, worried about a softening economic landscape and weaker demand for PCs, a key market for disk drives.
