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Seagate turns in mixed earning report, but demand for drives high

Hard drives are flying out the door--a record 50 million--but price cuts are affecting revenue.

Fifty million hard-drive fans can't be wrong.

Seagate Technology reported second-quarter revenue of $3.4 billion and net income of $403 million, or 73 cents in earnings per share. Excluding one-time charges, net income came to $419 million, or 76 cents in earning per share.

Both revenue and income jumped from the same period a year ago, which ended December 28. A year ago, Seagate reported $3 billion in revenue and $140 million in net income.

Analysts, however, had expected $3.49 billion in revenue and 75 cents in earnings per share excluding one-time costs. So Seagate missed a bit on revenue but beat out income expectations by a penny. In the drive business, revenue often gets eroded by price cuts.

The mixed report will add to the uneasiness that has pervaded investors.

The company shipped 50 million drives in the quarter--a record--and even said it experienced some capacity constraints. While PC makers remain the largest customers, a larger number of drives are being sold to consumer electronics companies.

For the current quarter, Seagate said that revenues would likely come in at $3.2 billion to $3.3 billion, while earnings per share would come to 57 cents to 61 cents a share or 62 to 66 cents excluding anticipated charges.

The company further said it expects double-digit growth. The outlook for the current quarter, combined with the results for the two fiscal quarters, put the company on track to achieve 15-percent growth in revenue and 36-percent growth in non-GAAP (generally accepted accounting principles) earning per share in the current fiscal year.