Seagate Technology Reports Fiscal Third Quarter 2009 Results



    



    - Cash balance increases to $1.5 billion

    - Exceeds revenue outlook; reports revenue of $2.1 billion

    
    - Expects ongoing margin improvement and return to profitability within
fiscal year 2010
    

    
    SCOTTS VALLEY, Calif., April 21 /PRNewswire-FirstCall/ -- Seagate
Technology (Nasdaq:   STX) today reported results for the quarter ended April 3,
2009 of 38 million disk drive unit shipments, revenue of $2.1 billion, a net
loss of $273 million and net loss per share of $0.56. Net loss and net loss
per share for the quarter include $18 million of purchased intangibles
amortization and other charges associated with acquisitions, and restructuring
and related accelerated depreciation charges of $36 million. The aggregate
impact of these items is a $54 million loss or approximately $0.11 per share
loss. Of the $36 million for restructuring and related accelerated
depreciation charges, $11 million was for accelerated depreciation charges
recorded in product development expense and $25 million was restructuring and
substantially relates to global headcount reductions.
    

    
    For the nine months ended April 3, 2009 the company reported results of
disk drive unit shipments of 123 million, revenue of $7.5 billion, a net loss
of $3.0 billion, and net loss per share of $6.17. Net loss and net loss per
share include $56 million of purchased intangibles amortization and other
charges associated with acquisitions, charges related to restructuring
activities of $181 million, a charge of $271 million that reflects an
unfavorable adjustment to the valuation allowance related to the company's
deferred tax assets and a $2.3 billion charge relating to the write-off of
goodwill and other long-lived assets. The aggregate impact of these items is a
$2.8 billion reduction in earnings, or a decrease of approximately $5.75 per
share. Of the $181 million in restructuring related charges, $55 million was
for accelerated depreciation charges, with $30 million recorded in cost of
revenue and $25 million in product development expense. The majority of the
remaining balance of the restructuring charges relate to global headcount
reductions.
    

    
    "I am encouraged by the progress we're making in improving our
operational performance," said Steve Luczo, Seagate chairman and chief
executive officer. "As a result, assuming a relatively stable business
environment, we believe we can improve margins and reach profitability within
fiscal year 2010."
    

    Business Outlook
    
    While there are signs of improved visibility, 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.
    

    
    For the June quarter, in light of the company's view of the current
market environment, the company is planning for the overall demand for disk
drives to be relatively flat as compared to the March quarter. Consequently,
the company expects revenue to be approximately $1.9 - $2.2 billion and gross
margin as a percent of revenue to improve by 300-400 basis points as compared
to the March quarter. Product development and marketing/administrative costs
are expected to decrease to approximately $340 million while other income and
expense is expected to be an expense of approximately $40 million. Net loss
per share is expected to be between $0.37 - $0.47, which includes
approximately $41 million or $0.08 per share for restructuring, purchased
intangibles amortization and other charges associated with acquisitions.
    

    
    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.
    

    
    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.
Consequently, the company expects to incur restructuring charges in the June
quarter of an undetermined amount.
    

    Cash and Liquidity
    
    The company remains focused on building liquidity and strengthening its
balance sheet over the long-term. To that end, Seagate has taken actions and
obtained sources of liquidity to support the business while the current
negative economic condition persists. The results of these decisions and
actions include:
    
    --  On April 3, 2009, Seagate entered into a Second Amended and Restated
        Credit Agreement the purpose of which is to increase the company's
        flexibility in meeting its obligations under its existing credit
        agreement, executed on September 19, 2006.
    --  On April 16, 2009, Seagate priced $430 million of 10% senior secured
        second-priority notes due 2014. The net proceeds are expected to be
        used for general corporate purposes, including the repayment or
        repurchase of all or some of the company's $300 million aggregate
        principal amount of floating rate senior notes due October 1, 2009 and
        other indebtedness.
    --  Cash, cash equivalents and short-term investments increased $172
        million quarter-over-quarter, to $1.5 billion.
    --  Compared to the prior quarter, days sales outstanding (DSO) was down
        five days to 37 days, days payable outstanding (DPO) decreased by one
        day to 63 days and days of inventory outstanding (DIO) decreased by 11
        days to 26. In aggregate, our cash conversion cycle decreased by 15
        days to zero. Improvement in DSO reflects the linearity of shipments
        during the quarter, while the improvement in DIO is a result of
        reducing inventory by roughly 28%.
    --  Investment in capital equipment during the March quarter was $59
        million and for the first nine months of the company's fiscal year
2009
        was approximately $553 million. The company currently expects fiscal
        2009 investment in capital equipment to be approximately $650 million.
        Based on the company's current macroeconomic view it expects fiscal
        year 2010 capital investment to be approximately $450 million.

    --  Management has recommended and the board has adopted a policy of not
        paying a quarterly dividend. This action coupled with the reduction of
        the dividend in January 2009 reduces cash obligations by about $230
        million annually.


    
    Additional information relating to the financial results for the third
fiscal quarter of 2009 can be found online at seagate.com.
    

    Conference Call
    
    Seagate will hold a conference call to review the fiscal third quarter
results at 2:00 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: 90458329

    Replay
    
    A replay will be available beginning today at 6:00 p.m. Pacific Time
through April 28 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: 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 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.
    



    

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

    
                                                       April 3,   June 27,
                                                         2009     2008 (a)
                                                         ----     --------
     ASSETS
      Cash and cash equivalents                        $1,352         $990
      Short-term investments                              129          151
      Accounts receivable, net                            872        1,410
      Inventories                                         577          945
      Deferred income taxes                               150          274
      Other current assets                                464          502
                                                          ---          ---
          Total Current Assets                          3,544        4,272
      Property, equipment and leasehold
       improvements, net                                2,355        2,464
      Goodwill                                             31        2,352
      Other intangible assets, net                         62          111
      Deferred income taxes                               453          616
      Other assets, net                                   181          305
                                                          ---          ---
          Total Assets                                 $6,626      $10,120
                                                       ======      =======
    LIABILITIES AND SHAREHOLDERS' EQUITY
       Short-term borrowings                             $350           $-
       Accounts payable                                 1,389        1,652
       Accrued employee compensation                      117          440
       Accrued warranty                                   216          226
       Accrued expenses                                   448          599
       Accrued income taxes                                 9           10
       Current portion of long-term debt                  320          360
                                                          ---          ---
          Total Current Liabilities                     2,849        3,287
       Long-term accrued warranty                         230          219
       Long-term accrued income taxes                     167          210
       Other non-current liabilities                      116          148
       Long-term debt, less current portion             1,680        1,670
                                                        -----        -----
          Total Liabilities                             5,042        5,534
    

    
       Shareholders' Equity                             1,584        4,586
                                                        -----        -----
          Total Liabilities and Shareholders' Equity   $6,626      $10,120
                                                       ======      =======
    

    
    (a) The information in this column was derived from the Company's audited
        consolidated balance sheet as of June 27, 2008.
    



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

    
                                           For the Three      For the Nine
                                            Months Ended      Months Ended
                                         April 3, March 28, April 3, March 28,
                                            2009    2008      2009     2008
                                            ----    ----      ----     ----
    

    
     Revenue                               $2,150  $3,104    $7,452  $9,809
    

    
     Cost of revenue                        1,993   2,288     6,448   7,295
     Product development                      243     254       738     758
     Marketing and administrative             134     164       424     484
     Amortization of intangibles               13      15        41      41
     Restructuring and other, net              25      20       126      52
     Impairment of goodwill and other
      long-lived assets                         -       -     2,290       -
                                              ---     ---     -----     ---
          Total operating expenses          2,408   2,741    10,067   8,630
                                            -----   -----    ------   -----
     Income (loss) from operations           (258)    363    (2,615)  1,179
    

    
     Interest income                            3      16        15      51
     Interest expense                         (35)    (30)      (95)    (96)
     Other, net                                 1       -       (26)     13
                                              ---     ---       ---     ---
          Other income (expense), net         (31)    (14)     (106)    (32)
                                              ---     ---      ----     ---
     Income (loss) before income taxes       (289)    349    (2,721)  1,147
     Provision for (benefit from) income
      taxes                                   (16)      5       284      45
                                              ---     ---       ---     ---
     Net income (loss)                      $(273)   $344   $(3,005) $1,102
                                            =====    ====   =======  ======
     Net income (loss) per share:
        Basic                              $(0.56)  $0.68    $(6.17)  $2.11
        Diluted                             (0.56)   0.65     (6.17)   2.02
     Number of shares used in per share
      calculations:
        Basic                                 489     507       487     522
        Diluted                               489     530       487     549
    



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

    
                                                     For the Nine Months Ended
                                                         April 3,  March 28,
                                                           2009       2008
                                                           ----       ----
    OPERATING ACTIVITIES
    Net income (loss)                                    $(3,005)    $1,102
    Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
        Depreciation and amortization                        707        631
        Stock-based compensation                              70         86
        Impairment of goodwill and other long-lived
         assets                                            2,290          -
        Deferred income taxes                                295         17
        Other non-cash operating activities, net              (8)       (10)
        Changes in operating assets and liabilities:
          Accounts receivable                                534         (8)
          Inventories                                        368       (279)
          Accounts payable                                  (263)       614
          Accrued expenses, employee compensation and
           warranty                                         (590)       147
          Other assets and liabilities                       233       (157)
                                                             ---      -----
              Net cash provided by (used in) operating
               activities                                    631      2,143
                                                             ---      -----
    INVESTING ACTIVITIES
    Acquisition of property, equipment and leasehold
     improvements                                           (553)      (637)
    Proceeds from sale of fixed assets                         4         29
    Purchases of short-term investments                     (124)      (439)
    Maturities and sales of short-term investments           146        425
    Proceeds from sale of investment in equity securities     11          -
    Acquisitions, net of cash acquired                         -        (78)
    Other investing activities, net                            4         15
                                                             ---        ---
              Net cash provided by (used in) investing
               activities                                   (512)      (685)
                                                            ----       ----
    FINANCING ACTIVITIES
    Proceeds from short-term borrowings                      350          -
    Repayment of long-term debt                              (20)       (34)
    Proceeds from exercise of employee stock options and
     employee stock purchase plan                             45        172
    Dividends to shareholders                               (132)      (159)
    Repurchases of common shares                               -     (1,284)
    Other financing activities, net                            -          2
                                                             ---        ---
              Net cash provided by (used in) financing
               activities                                    243     (1,303)
                                                             ---    -------
    

    
            Increase (decrease) in cash and cash
             equivalents                                     362        155
    Cash and cash equivalents at the beginning of the
     period                                                  990        988
                                                             ---        ---
    Cash and cash equivalents at the end of the period    $1,352     $1,143
                                                          ======     ======






    




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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