Thailand Didn't Slow Down Seagate's Earnings

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Hard drive maker Seagate Technology (Nasdaq: STX  ) knows how to make lemonade. The flooding of crucial manufacturing assets in Thailand last year forced the company and its rivals to rethink and rebuild their factories. A short-term drop in unit sales goosed street prices, thanks to the immutable laws of supply and demand, and Seagate is coming out of that disaster stronger than it was before.

We'll see signs of this opportunistic improvement on Tuesday, when Seagate reports third-quarter results.

Analysts expect Seagate to show earnings of $2.11 per share on $4.4 billion in sales. That's up from just $0.25 per share and $2.7 billion, respectively, in the year-ago period. Last quarter, Seagate shocked the Street with a 22% earnings surprise and strong sales. Shares jumped 24% overnight on the news. In short, the Thai disaster is hardly hurting Seagate's bottom line.

These conditions will stick around throughout 2012. In an interview with Forbes, CEO Steve Luczo explained that his system-building customers responded to the shortage of hard drives by ordering more low-end products in order to meet demand in their high-volume markets.

So inventories are drained up and down the supply chain, and there will still be an unmet demand of about 100 exabytes (or 150 million drives) at the end of 2012. To put that shortfall into perspective, Seagate planned to ship 60 million drives in the third quarter. Even with all the factories running at full speed again, the low supply will persist well into 2013, and so should the elevated unit prices.

Luczo doesn't see flash-based solid-state drives threatening his traditional disk technology anytime soon -- or anytime at all. "Flash is a complementary technology, it's not a competitive technology," he told Forbes. Even ultralight notebooks and tablets that ship with SSD storage still need to feed off a big and cheap magnetic disc somewhere: "If they have that machine, they have some other machine somewhere that's got 5 terabytes on it, because I can't do much with 128 gigs."

That's why he's more concerned with competition from traditional rival Western Digital (NYSE: WDC  ) than SSD specialists OCZ Technology (Nasdaq: OCZ  ) and STEC (Nasdaq: STEC  ) . Dell (Nasdaq: DELL  ) might choose a STEC or OCZ drive for an ultralight notebook product or specialized high-speed server system, but will then turn around and order up Seagate or Western Digital drives for the larger storage systems around that boutique item. In the data center, we're talking about a storage array; at home, it's either an external drive or a desktop system that can handle your hundreds of gigabytes of always-growing data.

Seagate loves the Big Data megatrend. But the Fool's top analysts have found one company that loves Big Data even more. Want to learn more about this stunning opportunity? Grab your copy of our special report, "The Only Stock You Need To Profit From the NEW Technology Revolution," free for a limited time.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Western Digital. Motley Fool newsletter services have recommended writing covered calls on Dell. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 15, 2012, at 4:42 PM, JeffMikkelson wrote:

    The article is like a denial of Moore's law:'s_law by suggesting you should only consider storage capacity, not storage speed.

    That first sentence in the article is pretty funny in hindsight. After reading the following sentence, I figured the author drank the lemonade that Seagate was serving. It also made me wonder if Seagate is drinking their own lemonade.


    Luczo doesn't see flash-based solid-state drives threatening his traditional disk technology anytime soon -- or anytime at all. "Flash is a complementary technology, it's not a competitive technology," he told Forbes.


Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1861813, ~/Articles/ArticleHandler.aspx, 10/25/2016 8:32:33 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
STX $34.27 Down -0.25 -0.72%
Seagate Technology CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
OCZ.DL $0.00 Down +0.00 +0.00%
OCZ Technology Gro… CAPS Rating: **
STEC.DL $0.00 Down +0.00 +0.00%
STEC CAPS Rating: ***
WDC $53.63 Up +0.11 +0.21%
Western Digital CAPS Rating: ***