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Seagate and Online Video

Posted on Wednesday, Dec 19th 2007

On October 16, Seagate Technology (NYSE: STX) reported its financial results for Q1 fiscal 2008. Earlier post on the company, part of the Online Video Beneficiaries series, is available here.

For the quarter ended September 28, 2007, revenue was $3.3 billion, up 18% y-o-y and 20.5% q-o-q. GAAP net income was $355 million and diluted net income per share was $0.64. Seagate has declared a quarterly dividend of $0.10 per share. It bought back 10.3 million of its common shares for approximately $250 million. Under the current stock repurchase program, it is authorized to buy approximately $725 million worth of more shares.

With strong demand driving the disc drive industry, Seagate maintained its number one positions in the Enterprise, Desktop, and Consumer Electronics markets. Disc drive unit shipments were 47 million, up 21% y-o-y and 20% q-o-q. In the Enterprise market, it shipped 4.6 million units. It has extended its hardware based full-disk encryption technology to its enterprise products. In the Consumer Electronics market, it shipped 5.7 million units, driven primarily by shipments into gaming applications and DVRs (which grew 35% y-o-y). In the mobile compute market, Seagate shipped a record 7.9 million units, up 87% y-o-y. In the desktop market, it shipped 29 millions units, up 22% sequentially.

For the second quarter, Seagate expects revenue in the range of $3.4 to $3.5 billion and GAAP diluted net income per share between $0.66 and $0.70.

Seagate has recently announced its plans to acquire MetaLINCS, a technology leader in the fast-growing E-Discovery market. Following this, its CEO William D. Watkins and Chairman Stephen J. Luczo sold 20,000 and 25,000 shares of common stock, respectively. Its stock is currently trading around $26 after reaching a 52-week of high of $28.91 on November 2. Market cap is around $14 billion.

I will maintain my bullish rating of the company, and fully expect it to continue being a beneficiary of the online video boom. In fact, since the market is being skittish again, this is a
good stock to keep an eye on to buy at a good price and then hold for a while. The advent of IPTV could put a lot of throttle into this market as well, as the hard drive needs of the set-top boxes which permit movie / video download rise exponentially.

Seagate Technology (STX)

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