Higher hard drive prices boosted Seagate Technology Plc’s third quarter earnings, but the electronic storage device maker expects margins to fall as production levels return to normal following floods in Thailand.
Seagate and rival Western Digital Corp’s output was hit by last year’s floods in Thailand, a major producer of electronic components, though limited supply of hard disk drives (HDD) increased prices, helping Seagate’s earnings beat analyst forecats.
The company said it expects its gross margins to come in above 34.5 percent during the April-June quarter, under the so-called non-GAAP method of accounting, down from 37 percent in the third quarter.
“Our supply chain probably rebounded the quickest (after the floods) and we were able to deliver… higher capacity drives to our customers. That’s the biggest reason why the margins were sustained at a higher level,” Seagate Chief Financial Officer Pat O’Malley said in a conference call with reporters.
Increasing enterprise demand for storage has helped companies like Seagate and Western digital, who together command almost 90 percent of the HDD market.
In the third quarter, Seagate reported net earnings of $1.15 billion, or $2.48 per share, compared with $93 million, or 21 cents a share, last year.
Excluding factors that could increase volatility, it earned $2.64, above the $2.11 profit expected by analysts, according to Thomson Reuters I/B/E/S.
The company now expects total industry-wide hard drive shipments for the fourth quarter to grow to 160 million units and hit pre-flood levels by the end of the year.
Seagate itself shipped 61 million drives in the third quarter – retaining the 43 percent market share it commands.
The company posted a 63 percent increase in third-quarter revenue to $4.45 billion. Seagate expects it to grow to at least $5 billion in the current quarter, it said on the call.
Seagate shares rose slightly to $28.91 in aftermarket trade. They closed at $27.89 on Tuesday on the Nasdaq. -By Himank Sharma