Seagate Technology Reports Fiscal Second Quarter 2008 Results



    
    - Quarterly revenue grows 14% year-over-year

    - Quarterly net income increases 188% year-over-year

    - Ships approximately 50 million units for the quarter, up 20%
    year-over-year
    

    SCOTTS VALLEY, Calif., Jan. 17 /CNW/ -- Seagate Technology (NYSE:   STX)
today reported disc drive unit shipments of approximately 50 million, revenue
of $3.4 billion, GAAP net income of $403 million, and diluted net income per
share of $0.73 for the quarter ended December 28, 2007. GAAP net income and
diluted net income per share includes approximately $31 million of purchased
intangibles amortization and other charges associated with the Maxtor, EVault
and MetaLINCS acquisitions and also a net gain from asset sales of
approximately $15 million. Excluding these items, non-GAAP net income and
diluted net income per share were $419 million and $0.76. Included in both
GAAP and non-GAAP results are restructuring charges of approximately $27
million or approximately $0.05 per share.
    For the six months ended December 28, 2007 Seagate reported revenue of
$6.7 billion, GAAP net income of $758 million, and diluted net income per
share of $1.37. GAAP net income and diluted net income per share includes
approximately $61 million of purchased intangibles amortization and other
charges associated with the Maxtor, EVault and MetaLINCs acquisitions and also
a net gain from asset sales of approximately $15 million. Excluding these
items, non-GAAP net income and diluted net income per share were $804 million
and $1.45. Included in both GAAP and non-GAAP results are restructuring
charges of approximately $32 million or approximately $0.06 per share.
    "Seagate's strong financial performance in the quarter reflects the
company's solid business model and expanded product portfolio, which
positioned us well in a favorable industry environment characterized by
seasonal strength across all storage markets and continued growth in global
demand," said Bill Watkins, Seagate chief executive officer. "During the
quarter, Seagate achieved record shipments and experienced some capacity
constraints, underscoring the phenomenal growth of digital content in both the
consumer and commercial markets. Based on unit demand across all categories,
we entered the March quarter in a position of strength. The storage industry
remains one of the world's most important and exciting industries. We are
confident Seagate's vision, technology, and operational excellence will drive
us to continued strong financial and operating performance in the March
quarter and double-digit year-over-year growth."
    Adjustments made to GAAP net income and diluted net income per share can
be found following the financial statements included with this press release.
Additional information relating to the financial results for the second fiscal
quarter of 2008 can be found online at seagate.com.
    
    Business Outlook
    
    For the March quarter, Seagate expects to report revenue of $3.2 - $3.3
billion, and GAAP diluted net income per share of $0.57 - $0.61. Excluding
approximately $27 million of purchased intangibles amortization and other
charges associated with past closed acquisitions, including MetaLINCS,
non-GAAP diluted net income per share for the March quarter is expected to
fall within the range of $0.62 - $0.66. At the mid-point, this guidance
represents a 15% revenue increase year-over-year and a 36% non-GAAP diluted
earnings per share increase year-over-year.
    This guidance does not include the impact of any future acquisitions,
stock repurchases or restructuring activities the company may undertake.
    
    Dividend and Stock Repurchase
    
    The company has declared a quarterly dividend of $0.10 per share to be
paid on or before February 15, 2008 to all common shareholders of record as of
February 1, 2008.
    During the quarter ended December 28, 2007, the company repurchased
approximately 9.3 million of its common shares related to its share repurchase
plan. The average price of the shares delivered to the company in the December
quarter was $27.00. The company has authorization to purchase approximately
$474 million of additional shares under the current stock repurchase program
and the company anticipates utilizing the remaining authorization within the
March quarter.
    
    Conference Call
    
    Seagate will hold a conference call to review the fiscal second quarter
results at 2:30 p.m. Pacific Time today. The conference call can be accessed
online at seagate.com or by phone as follows:

    
    USA: (877) 223-6202
    International: (706) 679-3742
    Conference ID: 28131131
    Replay
    
    A replay will be available beginning today at 6:30 p.m. Pacific Time
through January 24 at 8:59 p.m. Pacific Time. The replay can be accessed from
seagate.com or by phone as follows:

    
    USA: (800) 642-1687
    International: (706) 645-9291
    Conference ID: 28131131
    About Seagate
    
    Seagate is the worldwide leader in the design, manufacture and marketing
of hard disc drives, 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, and to be the low cost producer 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 future operating and financial performance, including expected
revenue, net income and diluted earnings per share (presented on a GAAP basis
as well as on a non-GAAP adjusted basis), price and product competition,
customer demand for our products, 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, such risks and
uncertainties include the impact of the variable demand and the aggressive
pricing environment for disc drives; dependence on Seagate's ability to
successfully qualify, manufacture and sell its disc drive products in
increasing volumes on a cost-effective basis and with acceptable quality,
particularly the new disc drive products with lower cost structures; the
impact of competitive product announcements and possible excess industry
supply with respect to particular disc drive products; and market conditions
and alternative cash and imperatives which could impact our ability to
repurchase our stock.  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
27, 2007 and in the company's Quarterly Report on Form 10-Q as filed with the
U.S. Securities and Exchange Commission on October 29, 2007 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.



    
                              SEAGATE TECHNOLOGY
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In millions)
                                 (Unaudited)
    

    
                                                December 28,       June 29,
                                                        2007       2007 (a)
    ASSETS
      Cash and cash equivalents                       $1,433           $988
      Short-term investments                             317            156
      Accounts receivable, net                         1,593          1,383
      Inventories                                        830            794
      Deferred income taxes                              215            196
      Other current assets                               469            284
        Total Current Assets                           4,857          3,801
      Property, equipment and leasehold
       improvements, net                               2,267          2,278
      Goodwill                                         2,385          2,300
      Other intangible assets                            157            188
      Deferred income taxes                              674            574
      Other assets, net                                  276            331
        Total Assets                                 $10,616         $9,472
    

    
    LIABILITIES AND SHAREHOLDERS' EQUITY
      Accounts payable                                $1,776         $1,301
      Accrued employee compensation                      297            157
      Accrued expenses, other                            782            786
      Accrued income taxes                                 2             75
      Current portion of long-term debt                  330            330
        Total Current Liabilities                      3,187          2,649
      Other non-current liabilities                      381            353
      Long-term accrued income taxes                     232              -
      Long-term debt, less current portion             1,734          1,733
        Total Liabilities                              5,534          4,735
    

    
      Shareholders' Equity                             5,082          4,737
        Total Liabilities and Shareholders' Equity   $10,616         $9,472
    

    
    (a) The information in this column was derived from the Company's audited
        consolidated balance sheet as of June 29, 2007.
    



    
                              SEAGATE TECHNOLOGY
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In millions, except per share data)
                                 (Unaudited)
    

    
                      For the Three Months Ended   For the Six Months Ended
                      December 28,  December 29,  December 28,   December 29,
                              2007         2006         2007         2006
    Revenue                 $3,420       $2,996       $6,705       $5,788
    Cost of revenue          2,531        2,450        5,008        4,800
    Product development        262          226          504          470
    Marketing and
     administrative            167          141          319          320
    Amortization of intangibles 13           12           27           23
    Restructuring and other,
     net                        27            1           32           (3)
      Total operating
       expenses              3,000        2,830        5,890        5,610
    Income from operations     420          166          815          178
    

    
    Interest income             19           25           35           44
    Interest expense           (34)         (55)         (66)         (74)
    Other, net                  18            9           14           11
      Other income (expense),
       net                       3          (21)         (17)         (19)
    Income before income
     taxes                     423          145          798          159
    Provision for income
     taxes                      20            5           40            -
    Net income                $403         $140         $758         $159
    Net income per share:
      Basic                  $0.77        $0.25        $1.43        $0.28
      Diluted                 0.73         0.23         1.37         0.27
    Number of shares
     used in per share
     calculations:
      Basic                    526          571          529          573
      Diluted                  556          598          558          600
    



    
                              SEAGATE TECHNOLOGY
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In millions)
                                 (Unaudited)
    

    
                                                   For the Six Months Ended
                                                  December 28,   December 29,
                                                        2007           2006
    OPERATING ACTIVITIES
    Net income                                          $758           $159
    Adjustments to reconcile net
     income to net cash from operating activities:
      Depreciation and amortization                      420            414
      Stock-based compensation                            58             69
      Allowance for doubtful accounts receivable          (4)            42
      Redemption charges on 8% Senior Notes due 2009       -             19
      In-process research and development                  4              -
      Other non-cash operating activities, net             3              1
      Changes in operating assets and liabilities:
        Current assets and liabilities                   120           (431)
        Non-current assets and liabilities               119             28
        Net cash provided by operating activities      1,478            301
    

    
    INVESTING ACTIVITIES
    Acquisition of property, equipment
     and leasehold improvements                         (362)          (466)
    Proceeds from sale of fixed assets                    24             28
    Purchases of short-term investments                 (383)          (322)
    Maturities and sales of short-term investments       222            687
    Acquisitions, net of cash acquired                   (78)             -
    Other investing activities, net                       17            (29)
        Net cash used in investing activities           (560)          (102)
    

    
    FINANCING ACTIVITIES
    Net proceeds from issuance of long-term debt           -          1,477
    Repayment of long-term debt                            -           (400)
    Redemption premium on 8% Senior Notes due 2009         -            (16)
    Proceeds from exercise of employee
     stock options and employee stock purchase plan      132            104
    Dividends to shareholders                           (107)          (104)
    Repurchases of common shares                        (500)        (1,075)
    Other financing activities, net                        2              1
        Net cash used in financing activities           (473)           (13)
    

    
        Increase in cash and cash equivalents            445            186
    Cash and cash equivalents at the beginning
     of the period                                       988            910
    Cash and cash equivalents at the
     end of the period                                $1,433         $1,096
    Use of non-GAAP financial information
    
    Our results of operations have undergone significant change in the past
few years, most significantly in connection with our acquisition of Maxtor. To
help the readers of our condensed consolidated financial statements prepared
on a GAAP basis better understand our past financial performance and our
expectations of our future results, we supplementally disclose, after making
certain non-GAAP adjustments, non-GAAP net income and non-GAAP diluted net
income per share. We also provide forecasts of these non-GAAP financial
measures. A reconciliation of the adjustments to GAAP net income and diluted
net income per share for the quarter and year-to-date periods are presented in
the tables below. In addition, an explanation of the ways in which our board
of directors and management use these non-GAAP financial measures to evaluate
the business, the substance behind our management's decision to use these
non-GAAP financial measures, the material limitations associated with the use
of these non-GAAP financial measures, the manner in which Seagate management
compensates for those limitations, and the substantive reasons why we believe
that these non-GAAP financial measures provide useful information to investors
is included under the caption "Use of Non-GAAP Financial Measures" in the Form
8-K furnished today with the U.S. Securities and Exchange Commission. This
additional non-GAAP financial information is not meant to be considered in
isolation or as a substitute for net income or diluted net income per share
prepared in accordance with GAAP. You should not compare our non-GAAP net
income or non-GAAP diluted net income per share results with those of other
companies, as the adjustments made to our GAAP results are unique to Seagate.



    
                              SEAGATE TECHNOLOGY
       ADJUSTMENTS TO GAAP NET INCOME AND DILUTED NET INCOME PER SHARE
                     (In millions, except per share data)
                                 (Unaudited)
    

    
                                       Three Months Ended    Six Months Ended
                                       December 28, 2007     December 28, 2007
    

    
    GAAP net income                               $403              $758
    Non-GAAP adjustments:
      Acquisition related adjustments:
        - Amortization of purchased
          intangible assets           A             24                48
        - Write-off of in-process
          research and development    B              4                 4
        - Stock-based compensation    C              3                 9
        - Gain on the sale
          of certain assets           D            (15)              (15)
      Adjustments for taxes           E              -                 -
    Non-GAAP net income                            419               804
    

    
    Diluted net income per share:
      GAAP                                      $ 0.73            $ 1.37
    

    Non-GAAP                                  $ 0.76            $ 1.45

    
    Shares used in diluted net
     income per share calculation:                 556               558
    



    
    A  For the three months and six months ended December 28, 2007,
       amortization of purchased intangible assets acquired in acquisitions
       was allocated as follows:
    


    
                                       Three Months Ended   Six Months Ended
                                        December 28, 2007   December 28, 2007
    Cost of revenue                              $11                   $22
    Amortization of intangibles                   13                    26
    

    
      Total amortization of
       purchased intangible assets               $24                   $48
    


    
    B  To exclude the write-off of in-process research and development related
       to the MetaLINCS acquisition (allocated to Product development)
    


    
    C  For the three months and six months ended December 28, 2007,
       stock-based compensation expense related to the Maxtor acquisition was
       allocated as follows:
    

    
                                        Three Months Ended   Six Months Ended
                                         December 28, 2007   December 28, 2007
    Cost of revenue                               $-                    $1
    Product development                            2                     5
    Marketing and administrative                   1                     3
    

    
      Total stock-based
       compensation expense                       $3                    $9
    


    
    D  To exclude the gain on the sale of certain assets (allocated to Other
       income, net)
    


    
    E  To exclude the tax effects, where applicable, of adjustments to GAAP
       net income
    




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 Technology Web Site:
http://www.seagate.com

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