Why Seagate Shares Fell in July



Seagate reports earnings below estimates

Shares of technology (QQQ) storage firm Seagate (STX) fell ~15% in July 2017 to close the month at $32.96. Seagate announced its fiscal 4Q17 results on July 25, 2017, and shares fell over 16% that day.

In fiscal 4Q17 (ended June 30, 2017), Seagate reported revenues of $2.4 billion, with non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $0.65 and net income of $192 million.

Analysts expected revenue of $2.6 billion and EPS of $0.99 in fiscal 4Q17. Seagate’s revenue was 7.7% below the analyst estimate, while its EPS was 34% below estimates in fiscal 4Q17.

Analysts expect Seagate’s revenue to fall 9.4% YoY in fiscal 1Q18 to ~$2.5 billion and to fall 6.2% YoY in fiscal 2018 to $10.1 billion.

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Lower PC demand and pricing pressures impacted Seagate

Declining demand in the global PC (personal computer) market have impacted Seagate’s revenue over the past few quarters. Global HDD (hard disk drive) shipments fell almost 10% YoY (year-over-year) in calendar 2016 to 424 million units. Notably, customers have been increasingly using inexpensive mobile devices such as smartphones and tablets instead of the traditional PC and laptops.

The merger of Western Digital (WDC) and SanDisk last year also meant increased competition for Seagate in the global storage market, particularly in the SSD (solid state drive) segment. Meanwhile, volatility in the DRAM (dynamic random access memory) and NAND (negative AND) markets, coupled with pricing pressures, led Seagate to maintain low inventories in fiscal 4Q17.

Seagate aims to reduce its employee headcount by 600, which is likely to generate savings in fiscal 1Q18. Seagate aims to save $90 million on an annual run rate basis.

Now let’s move on to Ericsson.


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