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Poor Seagate numbers hurt stock

The storage company's share price falls after it reports declining demand for its high-performance products and disappointing quarterly revenues.

Shares of Seagate Technology (SEG) dropped sharply in morning trading today after the storage company cited declining demand for its high-performance products and noted that its quarterly revenues will fall below expectations.

Seagate shares fell as low as 38 before finishing the day at 38-3/4 a share, down 3-5/8 from yesterday's close.

The storage maker, which reported after the market's close yesterday, said it expected profits of less than $1.01 per share before any one-time charges. Wall Street analysts were expecting the company to report net income of $1.06 per share, according to First Call. The company last year reported quarterly profits of 46 cents a share.

Seagate remained optimistic that the longer-term outlook for the storage business is strong but said revenues for the quarter ending June 27 will be 6 to 10 percent below the revenues of $2.5 billion reported for the preceding three months. In the year-ago quarter, Seagate reported revenues of $2 billion.

Despite the announcement that sales for high-end drives were below expectations, financial analysts likewise remained enthusiastic about continued demand for storage products.

A Bear Stearns report released yesterday echoed that belief and added that industry consolidation will help drive makers' profitability. The firm has a "buy" rating on Seagate, Quantum, and Western Digital.

A Salomon Brothers report released last week assessed the industry as healthy but expects disk drive stocks to be choppy through the rest of the quarter, or possibly until September, as companies prepare for the annual year-end push.

Last quarter, Seagate reported a jump in net earnings that beat analysts' expectations, largely because of a rise in sales of high-performance drives.

Seagate also announced that it is seeking authorization from its board to purchase up to an additional $600 million worth of its stock.