Mon, May 2, 2:19 PM
- Seagate (NASDAQ:STX) is falling for a second day after earnings, down 5.5% as analysts line up with lower targets after disappointing fiscal Q3 results and dim guidance.
- It's now down more than 24% over the two days.
- Citi cut its price target to $18, noting the company's guiding in Q4 toward a sixth straight decline in revenues. Capacity cuts could lead to an improvement in gross margin (to 27-28% from a current 23%), analyst Stanley Kovler says. “At this level of operating cash flow and despite capex down to 'maintenance' levels, further cash restructuring charges beyond the announced $150 million we see a rising risk of the board of directors and management rethinking its dividend payout."
- Wells Fargo also expected a bad quarter, and cut its valuation target to $21-$23 from $28-$32, but are maintaining a Market Perform rating amid some positives including strong current and upcoming near-line demand, and capex expected to stay low in fiscal 2017.
- The company's showing demand weakness in mission-critical enterprise drives, PC hard drives and the systems business, Wells says. "Gross margins have been a problem as well, declining 290bps sequentially segmented by a 70bps decline in HDD, 80bps in systems and 180bps from lower utilization."
- Elsewhere, Jefferies cut its target to $25 from $29; Maxim Group slashed its target to $25 from $36; JPMorgan Chase downgraded shares and cut its price target to $15 from $30; UBS trimmed to $20 from $22; RBC downgraded to Sector Performa nd cut its target to $24 from $36; and Brean lowered its target to $30 from $50 (but maintained a Buy).
- Now read Seagate: Don't Fall For This Dividend Yield Trap »
Fri, Apr. 29, 10:43 AM
- Seagate (STX -15%) has tumbled after missing FQ3 EPS estimates (revenue was in-line with what the company guided for in its April 13 warning) and guiding on its earnings call for FQ4 revenue of $2.3B, below a $2.61B consensus.
- Likewise, archrival Western Digital (WDC -12.6%) has tumbled after missing FQ3 estimates and guiding on its earnings call for FQ4 revenue of $2.6B-$2.7B and EPS of $1.00-$1.10, below a consensus of $2.92B and $1.34.
- Both companies have been stung by weak PC demand and SSD cannibalization of hard drives. Western estimates the FQ3 addressable market (TAM) for hard drives was 99.8M, down from 115.1M in FQ2 and 125M a year earlier. On the call, it forecast FQ4 TAM will be around 95M. CEO Steve Milligan: "We anticipate that hard drive demand in the June quarter will be slightly down from the March quarter, given continued softer PC demand and weaker than expected demand in performance enterprise."
- Western's hard drive shipments fell 21% Y/Y to 43.1M, with notebook, desktop, consumer electronics, branded, and enterprise sales all falling. Seagate's shipments fell 22% to 39.2M - enterprise and "client compute" drive sales fell sharply, while consumer electronics and branded shipments rose slightly. Both Seagate and Western's average drive capacity was slightly over 1.4TB, with Western reporting a $60 ASP.
- Seagate's non-GAAP gross margin fell to 22.7% (close to what was forecast in the warning) from 25.6% in FQ2 and 28.9% a year ago. Western's GM fell to 28.1% from 28.5% in FQ2 and 30.5% a year ago. Job cuts boosted each company's bottom line: Western's non-GAAP operating expenses fell 19% Y/Y to $477M thanks in part to efforts to integrate its HGST unit. Seagate's opex fell 21% to $439M.
- Western still expects the SanDisk acquisition (will lower the company's hard drive dependence) to close in the June quarter (Chinese approval is pending), and will give updated guidance after it does. It now expects $800M/year of cost savings related to HGST integration by the end of 2017, up from a prior $650M.
- Seagate: FQ3 results, earnings release, slides (.pdf)
- Western: FQ3 results, details, earnings release, datasheet (.pdf)
Thu, Apr. 14, 12:45 PM
Thu, Apr. 14, 9:25 AM
Wed, Apr. 13, 5:36 PM
Wed, Apr. 13, 5:02 PM
- Seagate (NASDAQ:STX) now expects FQ3 (calendar Q1) revenue of $2.6B, below prior guidance of $2.7B (consensus is also $2.7B). Gross margin is now expected to be ~23%; Seagate previously guided for GM to be roughly flat with FQ2's 25.6%. Hard drive shipments are expected to total 39M (good for a ~40% share).
- The hard drive giant blames weak demand for mission-critical enterprise drives (a high-margin business, has been hurt by SSD and cloud storage adoption), soft demand for storage systems and chips, soft desktop product demand (mostly in China), and a decision not to participate in the low-capacity notebook market. 8TB nearline drives (often used in cloud deployments) were a strong point.
- Seagate is down 2.7% after hours to $33.01. FQ3 results are due on the morning of April 29.
- Earlier this week: Global PC shipments drop to lowest level since 2007
- Now read Rethinking The Seagate Bull Thesis
Wed, Feb. 3, 3:59 PM
- Chairman/CEO Stephen Luczo has disclosed he bought 175K Seagate (STX +6.7%) shares yesterday at $30.43, and another 25K later in the day at $28.36. His stake now stands at 1.63M shares.
- Also: Philip Brace, head of Seagate's Cloud Systems & Electronic Solutions Group, bought 5K shares at $29.10. His stake stands at 14,930 shares.
- The hard drive giant is up 14% since beating FQ2 estimates and issuing better-than-feared (though below-consensus) FQ3 guidance last Friday. Benchmark upgraded on Monday.
Mon, Feb. 1, 12:51 PM
- After starting the day nearly flat, Seagate (NASDAQ:STX) has rallied above $30 on its second trading day after posting an FQ2 beat and issuing (to little surprise) light FQ3 guidance. Possibly helping: Benchmark has upgraded Seagate to Hold, albeit while cutting its target by $3 to $32.
- Deutsche's Sherri Scribner has cut her target by $5 to $35, while reiterating a Buy. She praises dividend yield (currently 8.7%), considers guidance better than feared, and notes a mix shift towards enterprise hard drives - enterprise units rose 4% Q/Q in FQ2 - is a positive for sales and gross margin. "From here, STX needs to deliver on goals to return to GM targets of 27-32% in F4Q-16, show continued OpEx discipline, continue to grow non-HDD revenue, and return to Y/Y Exabyte growth. We believe these goals should be attainable."
- FBN's Shebly Seyrafi (Sector Perform, target cut to $35) offered a mixed reaction. "[The hard drive addressable market] turned out to be ~115M units (down 18% Y/Y) in CQ4 2015, and we estimate that the TAM will decline further to 103M units (down 18% Y/Y) in CQ1 2015 ... A key positive in the STX report is that it apparently gained ~2pp of share Q/Q in enterprise HDDs with enterprise Exabyte shipments up 21% Q/Q ... We would like to see more stabilization in the company’s top-line growth on a Y/Y basis before possibly getting more positive on the stock."
- Seagate is now up 15% from Thursday's close. Shares go for 8x an FY17 (ends June '17) EPS consensus of $3.85 (down from $4.45 90 days ago). The company had $2.9B (over $9/share) in net debt at the end of FQ2.
Fri, Jan. 29, 10:25 AM
- With expectations low thanks to weak PC sales and soft enterprise server/storage demand, Seagate (STX +11.7%) has surged after beating FQ2 estimates and providing light FQ3 guidance. Likewise, archrival Western Digital (WDC +11.2%) is faring well after posting mixed FQ2 results (revenue missed, EPS beat) and guiding light.
- Guidance: Seagate has guided on its FQ2 call for FQ3 revenue of $2.7B, below a $2.85B consensus. Western guided on its call (transcript) for revenue of $2.8B-$2.9B and EPS of $1.20-$1.30, below a consensus of $3.23B and $1.46.
Seagate details: Seagate's FQ2 EPS benefited from the repurchase of 2.9M shares at a cost of $107M. Non-GAAP gross margin was 25.6%, +140 bps Q/Q and -260 bps Y/Y, and within a 25.5%-26% guidance range.
Hard drive revenue fell 21% Y/Y to $2.73B; revenue from enterprise systems, flash, and other products rose 15% to $259M. Hard drive shipments fell 19% Y/Y to 45.9M, with average capacity rising 23% to 1.32TB.
Western Digital details: Non-GAAP gross margin fell 40 bps Q/Q and 200 bps Y/Y to 28.5%; Western had forecast GM would be "slightly up" Q/Q, and is against guiding for a Q/Q increase. No shares were repurchased. Hard drive shipments fell 19% Y/Y to 49.7M; enterprise SSD revenue rose 44% to $270M. Western estimates the total market (TAM) for hard drives was 115.1M units, down from 118.7M in FQ1 and 140.8M a year ago. 35% of revenue was PC-related
Regarding Chinese firm Unisplendour's planned investment (15% stake) in Western, the company says it continues working with U.S. regulators (the CFIUS), and expects a decision in February. Meanwhile, the SanDisk acquisition (expected to see less regulatory scrutiny) is forecast to close in calendar Q2.
- Western also rallied yesterday after SanDisk (SNDK +4.7%) posted a healthy Q4 beat and issued soft Q1 guidance (expected given NAND price pressure and Apple's outlook) on Wednesday afternoon. For its part, SanDisk is up 9% over the last two days.
- Seagate: FQ2 results, earnings release, slides (.pdf).
- Western Digital: FQ2 results, earnings release, datasheet (.pdf).
Fri, Jan. 29, 8:01 AM
- Seagate Technology (NASDAQ:STX): FQ2 EPS of $0.82 beats by $0.11.
- Revenue of $2.99B (-19.2% Y/Y) beats by $50M.
- Shares +2.97% PM.
Fri, Jan. 15, 12:35 PM
- On a day the Nasdaq is off 4.1%, companies with strong PC exposure are seeing even bigger losses after Intel (down 9.2%) beat Q4 estimates and provided healthy 2016 sales guidance, but also reported a slowdown in server CPU sales growth and offered cautious earnings call remarks about Chinese demand and macro trends.
- Intel's Client Computing Group (provides PC/mobile CPUs) only saw a 1% Y/Y revenue drop in Q4 in the face of weak PC demand. However, volumes were down 16%, with desktop, notebook, and tablet CPU volumes respectively falling 9%, 10%, and 33%. A 17% increase in ASPs minimized Intel's revenue drop. Earlier this week, IDC and Gartner respectively estimated PC shipments fell 10.6% and 8.3% Y/Y in Q4.
- The list of PC-related names seeing big losses includes Microsoft (MSFT -4.8%), Nvidia (NVDA -6.7%), AMD (AMD -8.1%), HP Inc. (HPQ -5.2%), Micron (MU -8.9%), Seagate (STX -6.4%), and Western Digital (WDC -6.4%). AMD reports on Jan. 19, Microsoft and Western on Jan. 28, and Seagate on Jan. 29.
- In other Microsoft news, the company has carried out price cuts of up to 17% for Azure cloud computing services, following new price cuts from Amazon, and is reportedly looking to acquire Indian mobile ad network owner InMobi. Google was rumored to be in buyout talks with InMobi last year.
- AMD, meanwhile, has begun shipping its Opteron A1100 (Seattle) ARM server CPU. Seattle, first announced in 2013, sports up to eight 64-bit ARM Cortex A-57 CPU cores, and enters a market also targeted by AppliedMicro, Cavium, and Qualcomm.
Mon, Jan. 11, 6:19 PM
- Citing lower market multiples, Deutsche's Sherri Scribner respectively cut her Seagate (NASDAQ:STX) and Western Digital (NASDAQ:WDC) targets by $5 and $15 to $40 and $80. Nonetheless, Buy ratings were reiterated for both names - Scribner believes hard drive demand is stabilizing, and that Seagate/Western's valuations are attractive.
- RBC's Amit Daryanani estimated PC shipments from Taiwanese contract manufacturers (ODMs) fell 16% Y/Y in December, and deemed the figure "slightly negative" for Seagate and Western. He expects a soft 1H16, with potential improvement later in the year.
- Meanwhile, Taiwan's Economic Daily News reported notebook shipments from Taiwanese ODMs are expected to drop 15% Q/Q to 25M (seasonality will likely play a role), with volumes unlikely to recover prior to new notebook launches in Q2.
- Seagate fell 3.7% in regular trading; shares now trade for just 7.4x an FY17 (ends June '17) EPS consensus of $4.22. Western fell 4.7%; shares go for 7.2x an FY17 EPS (ends June '17) EPS consensus of $7.38.
Oct. 29, 2015, 1:15 PM
- Western Digital's (WDC +1.7%) FQ1 results were roughly in-line with the outlook provided in its Oct. 21 pre-announcement (provided while announcing the SanDisk deal). The company guided on its earnings call (transcript) for FQ2 revenue of $3.3B-$3.4B and EPS of $1.50-$1.60, below a consensus of $3.45B and $1.75.
- Western is nonetheless trading higher. Archrival Seagate (STX -2.9%), which issued an FQ1 warning on Oct. 15 (enterprise share loss to Western is believed to be the culprit) and reports on Friday morning, is selling off.
- Western's gross margin fell 90 bps Q/Q and 120 bps Y/Y in FQ1 to 28.9%; it's expected to rise "slightly" in FQ2. $60M was spent on buybacks; Western has said it will suspend its buyback (while keeping its dividend) on account of the SanDisk deal.
- Hard drive shipments totaled 51.7M - 15.8M notebook, 11.7M desktop, 11.5M consumer, 5.6M branded, 7.2M enterprise - up from 48.5M in FQ4 and down from 64.7M a year ago. 66% of revenue came from non-PC markets, up from 55% a year ago (the SanDisk deal will further increase that number). Enterprise SSD revenue was $233M vs. $244M in FQ4 and $156M a year ago.
- On the earnings call (transcript), Western noted demand for high-capacity enterprise hard drives (beloved by Internet giants) was "somewhat softer than anticipated" due to the "absorption of previously deployed storage assets." Regardless, it still expects a 35% enterprise capacity CAGR through 2020.
- The company echoes others in declaring it sees "some signs of stabilization" in PC demand. Ahead of the SanDisk deal (will boost Western's SSD share and lower its flash costs), Western also reports seeing "a very competitive market" in enterprise SSDs.
- Western's FQ1 results, PR, datasheet (.pdf)
Oct. 22, 2015, 2:48 PM
- Shortly after giving Western Digital the go-ahead to integrate Hitachi's former hard drive unit with its core operations, China's Ministry of Commerce has given Seagate (NASDAQ:STX) approval to do the same with what used to be Samsung's hard drive unit (acquired in 2011).
- The only remaining conditions: Seagate can't require customers to exclusively buy from the company, and TDK China can't be forced to sell hard drive heads exclusively to Seagate.
- Among other things, integration enables Seagate to achieve greater manufacturing scale, remove duplicate functions, and jointly source components from suppliers. Shares are up sharply on a day the Nasdaq is up 1.4%.
- Yesterday: Seagate makes CFO change
Oct. 19, 2015, 9:18 AM
- More than three years after Western Digital (NASDAQ:WDC) closed its acquisition of Hitachi's hard drive unit (HGST), China's Ministry of Commerce has approved integrating the business with Western Digital proper.
- The company will continue selling products under both the HGST and Western Digital brands, and maintain separate sales teams for two years. However, it plans to start integrating "corporate and other key functions, including [R&D], heads and media operations, engineering and manufacturing."
- HGST president Mike Cordano has been appointed to the newly-created position of COO. Western president Jim Murphy will now run the company's storage devices unit.
- Western is up 3.6% premarket. Archrival Seagate (NASDAQ:STX), hit hard last week by an FQ1 warning that some analysts argued indicates enterprise share loss to Western, is down 1.2%.
- Update (10:39AM ET): Western has given back its early gains. Seagate is down 2%.
Oct. 15, 2015, 12:46 PM
Seagate Technology Plc engages in the provision of electronic data storage technologies and solutions. Its products and services include network attached storage, high performance computing, data protection appliances, internal hard drives, backup and recovery services, flash storage, and... More
Industry: Data Storage Devices
Country: United States
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