By Larry Barrett, ZDNN
11.20.97 9:45 am ET
Seagate Technology Inc. will again fail to meet
analysts' earnings expectations in its second
quarter, which ends next Jan. 2.
Company officials blamed the shortfall on costs
related to its ongoing restructuring
program, which could soar to more than $100 million
in the quarter. They also said slower
sales in Asia and lower profit margins on its
high-end server drives conspired to erode their
bottom line.
Seagate isn't the only disk-drive maker to warn
investors of lower-than-expected earnings
in the quarter. Western Digital Corp. took the same
route, pre-announcing that earnings for
its second fiscal quarter ending Dec. 27 would be 20
cents to 30 cents per share -- well
below original analyst expectations of 83 cents per
share.
First Call consensus originally pegged Seagate to
post a profit of 24 cents per share in the
quarter.
Both companies said their second-quarter results
would be impacted by ``significantly
higher-than-normal competitive pricing pressures''
in the desktop hard-drive business, as
well as product mix and cost issues associated with
the company's last desktop drives with
thin-film inductive head technology.
Seagate's announcement sent analysts back to their
respective drawing boards ... again.
Goldman Sachs on Wednesday lowered its rating on
Seagate's stock from "buy" to "market
perform." Gruntal & Co. followed suit, lowering its
earnings expectations for both Seagate
and competitor Quantum Corp.
"This isn't the first time Seagate's done this,"
said Todd Bakar, an analyst at Hambrecht &
Quist. "It's practically a routine for them. We have
to review their new estimates and then
come up with our new projections."
The news sent Seagate's already stagnant stock into
a tailspin, dipping $1.19 per share to
$23.13 in afternoon trading. Since peaking at its
52-week high of $54.25 per share in May,
the stock has taken a steady plunge to Wednesday's
52-week low of $23.13.
In fact, Seagate's once-lofty status as the elite
high-performance drive manufacturer has
declined as much as the company's stock price. In
its first quarter of fiscal 1997, Seagate
lost $240 million, or 98 cents per share, on sales
of $1.8 billion. In the year-earlier quarter,
Seagate posted a profit of $129 million, or 53 cents
per share, on sales of more than $2
billion.
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Anyway, that's just my opinion, meant to confuse and disorient...
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