Seagate Reduces 1Q Sales Forecast

Zacks

Hard disk maker Seagate Technology (STX) has revised its first-quarter sales estimate downward. The company stated that lower demand for computer hard drives compelled it to lower expectations. The company now expects first quarter revenues to be in the range of $3.72 billion to $3.80 billion, a sharp 5.0% to 7.0% decline from the prior forecast of $4.0 billion.

This downward revision from the hard disk manufacturer comes on the back of falling demand for personal computers and other related accessories. The fall in demand in turn is a result of weakness in the economy and surge in demand for mobile computing devices like tablets.

Seagate is not the first one in this market to lower its sales estimates. Its key rival, Western Digital Corp. (WDC), had moved on the same line and reduced its fiscal first quarter sales and total available market (:TAM) estimates during the second week of September. Separately, Intel Corp. (INTC), the largest maker of computer chips, also lowered its sales guidance for the third quarter of 2012.

Industry experts also expect the weakness in PC demand to have a significant impact on the overall market for hard disks.

Previously in July, Seagate had reduced its fourth quarter guidance as well. Given the number of customers affected by the macro slowdown, Seagate now expects the addressable market to be relatively flat sequentially. It is therefore adjusting its production and inventory planning accordingly.

Full recovery in the HDD industry and increasing demand will position Seagate as the leading player in the market. Seagate has larger exposure to high-end corporate desktop and enterprise server markets than its rivals.

While lackluster PC demand and increasing use of SSDs will continue to pressure HDDs, Seagate’s growing exposure in the Enterprise SSD market may provide some cushion.

Currently, Seagate has a Zacks #3 Rank, implying a short-term Hold rating.

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