Seagate Technology plc (NASDAQ: STX), a world leader in storage
solutions, today announced selected preliminary financial
information for its fiscal third quarter of 2016, which ended on
April 1, 2016.
Seagate expects to report revenue of approximately $2.6 billion
and non-GAAP gross margin of approximately 23% for the fiscal third
quarter 2016. The Company expects to report HDD unit shipments of
approximately 39 million, representing approximately 40% market
share.
These preliminary results compare to the Company’s previous
forecast for fiscal third quarter 2016 of revenue of approximately
$2.7 billion and non-GAAP gross margin of approximately 25.6%.
The difference in the Company’s revenue and non-GAAP gross
margin from its forecast was driven primarily by reduced demand for
traditional mission critical HDD enterprise products, reduced
demand for the company’s systems and silicon products, reduced
demand for desktop client products primarily in China, and the
Company’s decision to not aggressively participate in the low
capacity notebook market. The reduced demand in the quarter
combined with focused inventory reductions decreased the Company’s
utilization of certain factories. Offsetting some of the quarter’s
demand weakness was stronger than expected demand for the Company’s
8TB nearline products, reflecting the Company’s belief that an
increasing level of enterprise applications are shifting to cloud
environments.
“We are disappointed that we did not anticipate the weaker
demand in the March quarter. There are many complex issues
impacting the traditional go to market channels in our market,
which are reducing our forecast visibility. Despite the disruption
of the shifts in our traditional mission critical HDD business in
the near term, we believe the long term benefit of cloud
architectures for end users, and the related need for very high
capacity drives, is a net positive for Seagate and the HDD
industry," said Steve Luczo, Chairman and Chief Executive
Officer.
Non-GAAP operating expenses for the fiscal third quarter are
expected to be approximately $438 million, slightly lower than
forecasted non-GAAP operating expenses.
“The Company is in the process of prioritizing our strategic
positioning, manufacturing footprint and operating expense
investments to achieve the appropriate level of normalized
earnings. We anticipate that these actions will be implemented over
the next several quarters,” said Luczo.
Conference Call Details for Fiscal Third Quarter 2016
Financial Results
Seagate will report its fiscal third quarter 2016 financial
results before the market opens on Friday, April 29, 2016. The
investment community conference call to discuss these results will
take place that day at 6:00 a.m. Pacific/9:00 a.m. Eastern Time.
The live event can be accessed online at Seagate’s Investor
Relations website at www.seagate.com/investors. An archived
audio webcast of this event will be available shortly following the
event conclusion.
About Seagate
To learn more about the company’s products and services, visit
www.seagate.com and follow us on Twitter, Facebook, LinkedIn,
Spiceworks, YouTube and subscribe to our blog. The contents of our
website and social media channels are not a part of this
release.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, each as
amended, including, in particular, statements about the Company’s
plans, strategies and prospects and estimates of industry growth
for the fiscal quarter ended July 1, 2016 and beyond.
These statements identify prospective information and may include
words such as “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “projects” and similar
expressions. These forward-looking statements are based on
information available to the Company as of the date of this report
and are based on management’s current views and assumptions. These
forward-looking statements are conditioned upon and also involve a
number of known and unknown risks, uncertainties, and other factors
that could cause actual results, performance or events to differ
materially from those anticipated by these forward-looking
statements. Such risks, uncertainties, and other factors may be
beyond the Company’s control and may pose a risk to the Company’s
operating and financial condition. Such risks and uncertainties
include, but are not limited to: items that may be identified
during its financial statement closing process that cause
adjustments to the estimates included in this report; the
uncertainty in global economic conditions; the impact of the
variable demand and adverse pricing environment for disk drives,
particularly in view of current business and economic conditions;
the Company’s ability to successfully qualify, manufacture and sell
its disk drive products in increasing volumes on a cost-effective
basis and with acceptable quality, particularly the new disk drive
products with lower cost structures; the impact of competitive
product announcements; currency fluctuations that may impact the
Company’s margins and international sales; possible excess industry
supply with respect to particular disk drive products; disruptions
to its supply chain or production capabilities; unexpected advances
in competing technologies; the development and introduction of
products based on new technologies and expansion into new data
storage markets; cyber-attacks or other data breaches that disrupt
its operations or results in the dissemination of proprietary or
confidential information; and the Company’s ability to achieve
projected cost savings in connection with restructuring plans and
fluctuations in interest rates. Information concerning risks,
uncertainties and other factors that could cause results to differ
materially from the expectations described in this report is
contained in the Company’s Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission on August 11,
2015, the “Risk Factors” section of which is incorporated into this
report by reference, and other documents filed with or furnished to
the Securities and Exchange Commission. These forward-looking
statements should not be relied upon as representing the Company’s
views as of any subsequent date and the Company undertakes no
obligation to update forward-looking statements to reflect events
or circumstances after the date they were made.
The inclusion of Seagate’s website address in this press release
is intended to be an inactive textual reference only and not an
active hyperlink. The information contained in, or that can be
accessed through, Seagate’s website is not part of this press
release.
Use of non-GAAP financial information
The Company uses non-GAAP measures of gross margin and operating
expenses, which are adjusted from results based on GAAP to exclude
certain expenses, gains and losses. These non-GAAP financial
measures may be provided to enhance the user’s overall
understanding of the Company’s current financial performance and
its prospects for the future. Specifically, the Company believes
non-GAAP results provide useful information to both management and
investors as these non-GAAP results exclude certain expenses, gains
and losses that it believes are not indicative of its core
operating results and because it is consistent with the financial
models and estimates published by financial analysts who follow the
Company.
These non-GAAP results are some of the primary measurements
management uses to assess the Company’s performance, allocate
resources and plan for future periods. Reported non-GAAP results
should only be considered as supplemental to results prepared in
accordance with GAAP, and not considered as a substitute for, or
superior to, GAAP results. These non-GAAP measures may differ from
the non-GAAP measures reported by other companies in its
industry.
For the ThreeMonths EndedApril 1,
2016 Reconciliation of Preliminary GAAP Gross Margin:
Preliminary GAAP Gross Margin 20 % Non-GAAP adjustments:
(A)
3 % Preliminary non-GAAP Gross Margin 23 %
(A) Gross margin has been adjusted on a non-GAAP
basis to exclude the revenue and cost of sales from our sold data
services business, amortization of intangibles associated with
acquisitions, recognition of certain terminated contracts, and
write off of certain fixed assets and discontinued inventory.
For the ThreeMonths EndedApril 1,
2016 Reconciliation of Preliminary Operating Expense:
Preliminary GAAP Operating Expense $ 497 Non-GAAP adjustments:
Product Development
(A) (2 ) Marketing and administrative
(B) (10 ) Amortization of intangibles
(C) (27 )
Restructuring and other, net
(D) (20 ) Preliminary non-GAAP
Operating Expense $ 438
(A) Product development expense has been adjusted on
a non-GAAP basis to exclude the impact of integration costs
associated with acquisitions.
(B) Marketing and administrative expense has been
adjusted on a non-GAAP basis primarily to exclude the write off of
certain fixed assets and the impact of our sold data services
business.
(C) Amortization of intangibles primarily related to
our acquisitions has been excluded on a non-GAAP basis.
(D) Restructuring and other, net, has been adjusted
on a non-GAAP basis primarily related to a reduction in our work
force as a result of our ongoing focus on cost efficiencies in all
areas of our business.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160413006595/en/
Seagate Technology plcEric DeRitis,
408-658-1561eric.deritis@seagate.com
Seagate Technology (NASDAQ:STX)
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