Seagate Technology Announces Selected Preliminary Fiscal Third Quarter 2009 Financial Results



    
    - Exceeds revenue outlook, cash balance increases to $1.5 billion

    - Releases initial June quarter outlook

    - Provides liquidity update, eliminates quarterly dividend

    
    SCOTTS VALLEY, Calif., April 13 /PRNewswire-FirstCall/ -- Seagate
Technology (Nasdaq:   STX) today announced selected preliminary financial
results for its third fiscal quarter which ended on April 3, 2009 and an
initial business outlook for its fourth fiscal quarter ending July 3, 2009.
    

    Preliminary Fiscal Third Quarter 2009 Results
    
    Seagate expects to report unit shipments of approximately 39 million and
revenue of approximately $2.1 billion, exceeding the company's original
outlook of $1.6 - 2.0 billion. The company believes the total available market
(TAM) for hard disk drives was in the range of 110-112 million units for the
March quarter. Unit demand for Seagate's 2.5-inch and 3.5-inch ATA products
was better than planned and the company gained significant share in each of
these markets. The company's leadership position in the enterprise market
remained substantially unchanged from the prior quarter; however, the TAM for
enterprise class products decreased by an estimated 20%, sequentially. In
addition, the company shipped a higher mix of lower capacity desktop and
notebook products than planned. Cash, cash equivalents and short-term
investments increased by $200 million to approximately $1.5 billion.
    

    
    Gross margin as a percent of revenue ("gross margins") is expected to be
approximately 7 - 7.5%, which is better than the company anticipated due to
higher volumes and effective spending controls. Compared to the prior quarter,
gross margins decreased by approximately 700 basis points due to like-for-like
product price declines, an estimated 20% reduction in the TAM for enterprise
class products, and lower factory utilization and fixed cost absorption as the
company continues to aggressively manage inventory and align production with
demand.
    

    
    Product development and marketing/administrative costs are expected to be
approximately $380 million, including approximately $10 million of accelerated
depreciation, which is favorable compared to the original outlook of $395
million.
    

    
    "I'm encouraged by our progress during the quarter in identifying and
addressing a number of key strategic issues that are critical to the success
of our business model," said Steve Luczo, Seagate chairman and chief executive
officer. "Specifically, we are realigning our business processes and
optimizing our product portfolio to maximize profitability. These actions
allow us to more effectively fund our technology development, drive product
leadership and create value for our customers by delivering the industry's
best products. We expect to see the effects of these actions in our product
transitions, resulting in an ongoing improved margin profile. We're encouraged
with the ramp of our new 250GB and 500GB 2.5-inch products and 500GB and 1TB
3.5-inch products as they transitioned to volume this quarter. Additionally,
we are addressing the near- to mid-term liquidity requirements through the
recently announced amendment to our credit agreement and the announcement
today of our anticipated financing."
    

    Initial Fiscal Fourth Quarter 2009 Outlook
    
    Current uncertainty in global economic conditions makes it particularly
difficult to predict product demand and other related matters and makes it
more likely that Seagate's actual results could differ materially from current
expectations.
    

    
    For the June quarter, the company expects the TAM, on a unit basis, to be
flat as compared to the March quarter in contrast to the historical norms of a
slight decrease, with pricing consistent with historical June quarters. The
company sees no significant increase in the TAM for the enterprise market and
expects to maintain its leading share position in this market in the June
quarter. Accordingly, the company expects revenue to be in the range of $1.9 -
2.2 billion and gross margins to improve by 300 - 400 basis points as products
based on the 2.5-inch 250GB/disk and 3.5-inch 500GB/disk product platforms
continue to ramp and replace less cost-efficient product platforms. The
company believes the ongoing transition to these new product platforms,
coupled with targeted cost structure reductions, provides the foundation for
the continued improvement of gross margins into its fiscal year 2010. Product
development and marketing/ administrative costs are expected to be
approximately $340 million for the June quarter, with the targeted run rate
being less than $300 million per quarter which is expected to be achieved
during fiscal year 2010.
    

    
    As part of the company's ongoing cost structure alignment, additional
restructuring actions are currently being addressed. The company believes
opportunities exist to reduce operating costs in product development,
marketing/administrative and manufacturing areas to target a cost structure
that generates positive cash flow and earnings within its fiscal year 2010.
The estimated cost of any additional restructuring activities has yet to be
determined.
    

    
    The fiscal fourth quarter 2009 outlook does not include the impact of any
future mergers, acquisitions, dispositions or other business combinations,
financing or potential new restructuring activities the company may undertake.
The company is continuing to evaluate various financing options to manage the
retirement and replacement of existing debt and associated obligations,
including the issuance of new straight debt securities, exchanging existing
debt securities for new equity or other debt securities and retiring existing
debt securities pursuant to privately negotiated transactions, open market
purchases or otherwise.
    

    Liquidity
    
    Cash, cash equivalents and short-term investments as of April 3, 2009
totaled approximately $1.5 billion compared to $1.3 billion in the prior
quarter. Approximately $90 million of cash restructuring payments were made
during the March quarter.
    

    
    To further enhance liquidity, management has recommended and the board
has adopted a policy of not paying a quarterly dividend. This action is
expected to reduce cash outflows by approximately $60 million annually.
    

    
    As disclosed on April 6, 2009, the company has amended the terms and
financial covenants relating to the existing revolving credit facility. The
company believes the new financial covenants provide adequate flexibility for
the remaining term of the credit facility.
    

    Full Fiscal Third Quarter 2009 Financial Results
    
    Seagate will report full fiscal third quarter financial results on
Tuesday, April 21, 2009 after the close of the market. A subsequent conference
call for the investment community will take place at 2:00 p.m. Pacific Time.
The conference call can be accessed online at www.seagate.com or by telephone
as follows:
    

    

    
    USA: (877) 223-6202
    International: (706) 679-3742
    Conference ID: 90458329

    
    A replay will be available beginning April 21 at 6:00 p.m. Pacific Time
through April 28 at 8:59 p.m. Pacific Time. The replay can be accessed through
Seagate's website at www.seagate.com or by telephone as follows:

    
    USA: (800) 642-1687
    International: (706) 645-9291
    Conference ID: 90458329

    About Seagate
    
    Seagate is the worldwide leader in the design, manufacture and marketing
of hard disk drives and storage solutions, providing products for a wide-range
of applications, including Enterprise, Desktop, Mobile Computing, Consumer
Electronics and Branded Solutions. Seagate's business model leverages
technology leadership and world-class manufacturing to deliver
industry-leading innovation and quality to its global customers, with the goal
of being the time-to-market leader in all markets in which it participates.
The company is committed to providing award-winning products, customer support
and reliability to meet the world's growing demand for information storage.
Seagate can be found around the globe and at http://www.seagate.com.
    

    Cautionary Note Regarding Forward-Looking Statements
    
    This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These forward-looking
statements include, but are not limited to, statements related to the
company's preliminary results for the March quarter and its future operating
and financial performance, including expected revenue, net loss and product
competition, customer demand for our products, the impact of our recent and
anticipated cost reduction efforts and general market conditions. These
forward-looking statements are based on information available to Seagate as of
the date of this press release. Current expectations, forecasts and
assumptions involve a number of risks, uncertainties, and other factors that
could cause actual results to differ materially from those anticipated by
these forward-looking statements. Such risks, uncertainties, and other factors
may be beyond the company's control. In particular, uncertainty in global
economic conditions pose a risk to the overall economy as consumers and
businesses may defer purchases in response to tighter credit and negative
financial news. Such risks and uncertainties also include the impact of the
variable demand and the aggressive pricing environment for disk drives,
particularly in view of current business and economic conditions; dependence
on Seagate's ability to successfully qualify, manufacture and sell its disk
drive products in increasing volumes on a cost-effective basis and with
acceptable quality, particularly the new disk drive products with lower cost
structures; the impact of competitive product announcements and possible
excess industry supply with respect to particular disk drive products; and our
ability to achieve projected cost savings in connection with our anticipated
and announced restructuring plans. Information concerning risk, uncertainties
and other factors that could cause results to differ materially from those
projected in the forward-looking statements is contained in the company's
Annual Report on Form 10-K as filed with the U.S. Securities and Exchange
Commission on August 13, 2008, and in the company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission on February 10,
2009, which statements are incorporated into this press release by reference.
These forward-looking statements should not be relied upon as representing the
company's views as of any subsequent date and Seagate undertakes no obligation
to update forward-looking statements to reflect events or circumstances after
the date they were made.
    





    




For further information:

For further information: Brian Ziel, Media Relations, +1-831-439-5429,
brian.ziel@seagate.com, or Rod Cooper, Investor Relations, +1-831-439-2371,
rod.j.cooper@seagate.com, both of Seagate Technology Web Site:
http://www.seagate.com

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SEAGATE TECHNOLOGY

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