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Seagate plods along steadily despite promise of Xyratex buyout

Revenues rise, revenues fall, they rise again. C'est la vie

Seagate Ultra Mobile HDD

Up and down: Seagate's second fiscal 2014 quarter grew looking back one quarter, but shrank looking back a year.

Revenues for the quarter ending 27 December were $3.53bn. Last quarter saw revenues of $3.5bn so we saw a little bit of growth – but a year ago revenues were $3.67bn, so we saw shrinkage.

Net income was $428m; last quarter it was $427m and a year ago it was $492m. Same pattern; up and down.

What did Seagate have to say about this? Steve Luczo, CEO and chairman, commented: "Seagate’s results in the December quarter reflect discipline in managing the profitability of our business and strong operational execution."

Referring to the Xyratex acquisition he added: "We continue to strategically invest in our product portfolio and enhance our vertically integrated manufacturing capabilities to effectively capitalise on the cloud, mobile and open source storage trends that are being fueled by data growth."

We might point out that this data growth isn't enough to fuel Seagate's revenues as much as it would wish. It seems that selling disks into the cloud service provider market hasn't taken off as much as Seagate and its OEMs might have hoped.

The company's earnings missed Wall Street estimates and shares fell from $60.68 on Friday to $54.49 at the time of writing.

The Seagate money machine "generated approximately $856m in operating cash flow, paid cash dividends of $142m and repurchased 33 million ordinary shares for approximately $1.5bn," according to the company.

Analyst outfit Stifel Nicolaus' MD, Aaron Rakers, pointed out:

  • There was a 4 per cent sequential decline in total enterprise HDDs shipped. A total of 56.8 million drives were shipped
  • Seagate should ship 6TB shingled magnetic recording hard drives in the second calendar 2014 quarter
  • Average GB/drive was 922GB in the quarter; it was 878GB last quarter. This is larger than WD which saw 874GB/drive in its latest quarter and 811GB/drive a quarter ago
  • Seagate is testing 84-drive enclosures with cloud vendors today; we believe this to be Xyratex’s OneStor solutions

For comparison WD did better, at least in terms of revenue; its latest quarterly revenues were $4bn and net income was $430m, just a tad above Seagate's.

Next quarter Seagate expects to see revenues of at least $3.4bn. We might see a Xyratex contribution then too – and that should cause a jump in revenues. ®

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