Seagate Technology Reports Fiscal First Quarter 2010 Financial Results


    
    - Quarterly revenue of $2.66 billion

    - Establishes long-term gross margin target of 22-26%

    - Fiscal year-to-date debt reduction of $685 million






    
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<p>SCOTTS VALLEY, Calif., <chron>Oct. 20</chron> /CNW/ -- Seagate Technology (Nasdaq:   STX) today reported financial results for the quarter ended <chron>October 2, 2009</chron> of 46.3 million disk drive unit shipments, revenue of <money>$2.66 billion</money>, gross margin of 24.5%, net income of <money>$179 million</money> and diluted earnings per share of <money>$0.35</money>. The financial results for the quarter include <money>$10 million</money> of purchased intangibles amortization, <money>$46 million</money> of restructuring and a write down of long-lived assets of <money>$64 million</money>. The aggregate impact of these items is <money>$120 million</money> or approximately <money>$0.23</money> per share.</p>
<p/>
<p>During the first fiscal quarter, Seagate reduced short-term borrowings and long-term debt by approximately <money>$465 million</money> primarily with the maturity of its <money>$300 million</money> floating rate senior notes and by paying down its revolving credit facility by <money>$150 million</money>. Subsequent to the end of the first fiscal quarter, Seagate paid off the remaining balance of its revolving credit facility of <money>$200 million</money> and made open market purchases of <money>$20 million</money>, bringing the total debt reduction during fiscal 2010 to approximately <money>$685 million</money>.</p>
<p/>
<p>"At a time when economic conditions remained challenging we are very pleased with the company's financial performance, delivering strong revenues, margins and cash generation," said Steve Luczo, Seagate CEO. "The company has returned to its operating model well ahead of our expectations of six months ago and now expects to sustain gross margin of 22-26%. Although mission critical enterprise demand in particular has yet to recover to historical levels, we benefitted from our time-to-market product delivery to customers integrating our notebook, desktop and enterprise drives."</p>
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    Business Outlook
    
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<p>While visibility has improved throughout the calendar year, the ongoing uncertainty in global economic conditions makes it difficult to predict product demand and other related matters, which makes it more likely that Seagate's actual results could differ materially from current expectations.</p>
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<p>For the December quarter, the company is planning for the overall industry demand for disk drives to be 153 - 160 million units. As a result, the company expects revenue to be approximately <money>$2.75 - $2.85 billion</money> and gross margin as a percent of revenue to be near the high end of the company's targeted range of 22-26%. In today's financial results conference call, the company will also provide an update on current and expected business conditions, including key underlying assumptions, for its financial outlook for fiscal year 2010.</p>
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<p>The December quarter outlook does not include the impact of any potential new restructuring activities, future mergers, acquisitions, financing, dispositions or other business combinations the company may undertake. The company's policy is to refrain from commenting on any such activities.</p>
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<p>Additional information relating to the financial results for the fiscal first quarter of 2010 can be found online at seagate.com.</p>
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    Conference Call
    
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<p>Seagate will hold a conference call to review the fiscal first quarter results at <chron>2:00 p.m. Pacific Time</chron> today. The conference call can be accessed online at seagate.com or by phone as follows:</p>
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    USA: (800) 591-6945
    International: (617) 614-4911
    Participant Passcode: 40885241

    Replay
    
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<p>A replay will be available beginning today at <chron>6:00 p.m. Pacific Time</chron>. The replay can be accessed from seagate.com.</p>
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    About Seagate
    
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<p>Seagate is the world leader in hard disk drives and storage solutions. Learn more at seagate.com.</p>
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    Cautionary Note Regarding Forward-Looking Statements
    
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<p>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 future operating and financial performance in the <chron>December 2009</chron> quarter, and thereafter, and include statements regarding expected revenue, gross margin, product competition, customer demand for disk drives 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, the decline in global economic conditions continues to pose a risk to the Company's operating and financial performance as consumers and businesses have, and may continue to, defer purchases in response to tighter credit and negative financial conditions. Such risks and uncertainties also include the impact of the variable demand, 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 the Company's ability to achieve projected cost savings. Information concerning risks, 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 <chron>August 19, 2009</chron>, 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.</p>
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                                  SEAGATE TECHNOLOGY
                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (In millions)
                                     (Unaudited)
    
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                                                          October 2,   July 3,
                                                            2009       2009(a)
                                                          -------     --------
    ASSETS
      Cash and cash equivalents                           $1,530     $1,427
      Short-term investments                                  96        114
      Restricted cash and investments                        166        508
      Accounts receivable, net                             1,242      1,033
      Inventories                                            622        587
      Deferred income taxes                                   99         97
      Other current assets                                   552        528
                                                             ---        ---
        Total Current Assets                               4,307      4,294
      Property, equipment and leasehold improvements,
        net                                                2,039      2,229
      Deferred income taxes                                  369        372
      Other assets, net                                      184        192
                                                             ---        ---
        Total Assets                                      $6,899     $7,087
                                                          ======     ======
    LIABILITIES AND SHAREHOLDERS' EQUITY
      Short-term borrowings                                 $215       $350
      Accounts payable                                     1,674      1,573
      Accrued employee compensation                          142        144
      Accrued warranty                                       206        213
      Accrued expenses                                       440        483
      Accrued income taxes                                    13         10
      Current portion of long-term debt                      107        421
                                                             ---        ---
        Total Current Liabilities                          2,797      3,194
      Long-term accrued warranty                             212        224
      Long-term accrued income taxes                          67         69
      Other non-current liabilities                          134        120
      Long-term debt, less current portion                 1,910      1,926
                                                           -----      -----
        Total Liabilities                                  5,120      5,533
    
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      Shareholders' Equity                                 1,779      1,554
                                                           -----      -----
        Total Liabilities and Shareholders' Equity        $6,899     $7,087
                                                          ======     ======
    
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    (a) As adjusted due to changes to the accounting for convertible debt
        instruments implemented in the first quarter of fiscal year 2010.


    
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                                  SEAGATE TECHNOLOGY
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                          (In millions, except per share data)
                                    (Unaudited)
    
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                                                    For the Three Months Ended
                                                    --------------------------
                                                       October 2,   October 3,
                                                          2009      2008(a)
                                                        -------      -------
    
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    Revenue                                             $2,663         $3,033
    Cost of revenue                                      2,010          2,508
    Product development                                    208            260
    Marketing and administrative                           106            148
    Amortization of intangibles                              8             14
    Restructuring and other, net                            46             23
    Impairment of long-lived assets                         64             -
                                                           ---            ---
             Total operating expenses                    2,442          2,953
                                                         -----          -----
    Income (loss) from operations                          221             80
    
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    Interest income                                          1              7
    Interest expense                                       (45)           (33)
    Other, net                                               3            (13)
                                                          ----           ----
         Other income (expense), net                       (41)           (39)
                                                          ----           ----
         Income (loss) before income taxes                 180             41
         Provision for (benefit from) income taxes           1            (16)
                                                          ----           ----
         Net income (loss)                                $179            $57
                                                          ====           ====
         Net income (loss) per share:
           Basic                                         $0.36          $0.12
           Diluted                                        0.35           0.12
         Number of shares used in per share
          calculations:
            Basic                                          494            485
            Diluted                                        512            494
    
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    (a) As adjusted due to changes to the accounting for convertible debt
        instruments implemented in the first quarter of fiscal year 2010.

    
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                                SEAGATE TECHNOLOGY
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In millions)
                                   (Unaudited)
    
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                                                For the Three Months Ended
                                                --------------------------
                                                    October 2,   October 3,
                                                        2009      2008(a)
                                                     -------     -------
    OPERATING ACTIVITIES
    Net income                                          $179            $57
    Adjustments to reconcile net income to net
     cash provided by operating activities:
    Depreciation and amortization                        204            253
    Stock-based compensation                              11             27
    Impairment of long-lived assets                       64              -
    Other non-cash operating activities, net               4             (8)
    Changes in operating assets and liabilities:
       Accounts receivable                              (209)            16
       Inventories                                       (35)            36
       Accounts payable                                  112            278
       Accrued employee compensation                      (2)          (287)
       Accrued warranty                                  (19)             -
       Accrued expenses                                  (54)            26
       Other assets and liabilities                       23            (94)
                                                         ---            ---
      Net cash provided by operating activities          278            304
                                                         ---            ---
    INVESTING ACTIVITIES
    Acquisition of property, equipment and
     leasehold improvements                              (89)          (280)
    Purchases of short-term investments                  (41)           (90)
    Maturities and sales of short-term
     investments                                          58             93
    Decrease in restricted cash and investments           10              -
    Other investing activities, net                       (2)            12
                                                         ---            ---
      Net cash used in investing activities              (64)          (265)
                                                        ----          -----
    FINANCING ACTIVITIES
    Proceeds from short-term borrowings                   15              -
    Repayment of short-term borrowings                  (150)             -
    Retirements and maturities of long-term
     debt                                               (334)             -
    Decrease in restricted cash and investments          332              -
    Proceeds from exercise of employee stock
     options and employee stock purchase plan             26             35
    
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    Dividends to shareholders                             -             (59)
                                                        ----            ----
      Net cash used in financing activities             (111)           (24)
                                                       -----            ----
    
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    Increase (decrease) in cash and cash
     equivalents                                         103             15
    Cash and cash equivalents at the beginning
     of the period                                     1,427            990
                                                       -----          -----
    Cash and cash equivalents at the end of the
     period                                           $1,530         $1,005
                                                      ======         ======
    
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    (a) As adjusted due to changes to the accounting for convertible debt
        instruments implemented in the first quarter of fiscal year 2010.




    

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

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