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Storage

Disk-drive makers spin out strong profits

Maxtor and Seagate Technology beat analysts' earnings expectations, another sign of good times for the industry.

Disk-drive makers Maxtor and Seagate Technology beat analysts' earnings expectations Tuesday, another sign of good times for the industry.

Maxtor reported earnings per share, excluding charges, of 20 cents and revenue of $1.07 billion for the quarter ended Sept. 27. Analysts on average were expecting earnings of 17 cents per share, excluding charges, and revenue of $991 million, according to research firm First Call.

Seagate posted earnings per share of 40 cents and revenue of $1.74 billion for the quarter ended Oct. 3. Analysts on average were expecting earnings of 36 cents per share and revenue of $1.64 million, according to First Call

Both companies also saw revenue climb year over year. In the third quarter of 2002, Maxtor's revenue was $819.7 million. Seagate's revenue for the comparable quarter last year was $1.58 billion.

The better-than-expected results come amid a sunny outlook for the disk-drive industry, thanks to factors that include a shrinking number of drive makers and a growing demand for disk drives in relatively new consumer applications such as personal video recorders.

The disk-drive business has been a turbulent one, marked by plunging prices and stiff competition. The average sales price for desktop drives fell from $401 in 1992 to $77 in 2002, according to J.P. Morgan.

But the current outlook for hard-drive demand is rosy. Desktop personal computers make up the bulk of the market for hard drives, and the number of desktop PCs shipped should rise 4.2 percent this year, to 105.1 million units, and increase by 7.6 percent next year, to 113.1 million units, according to research firm TrendFocus. The number of notebook computers, meanwhile, is expected to jump 20.2 percent this year to 39.8 million, it said.

Seagate gave some credit for its quarterly results to its recently introduced drive for notebook computers.

"Momentus, our new notebook drive, has been well received by our OEM (original equipment manufacturer) customers--shipping 312,000 units during the September quarter," Seagate CEO Steve Luczo said in a statement. "We're confident in our ability to meet or exceed our goal of 10 percent market share as we exit the June 2004 quarter."

Maxtor reported net income of $29.9 million, or 12 cents per share, for the third quarter, including a charge of $20.5 million for the amortization of intangible assets and $0.2 million in stock compensation expenses.

"As we enter the seasonally strongest quarter of the year, we look forward to continued momentum," Maxtor CEO Paul Tufano said in a statement.