Hard drive builder Seagate Technology (Nasdaq: STX) went into last night's earnings report on high investor expectations. The stock had gained 43% over the previous three months, sitting very close to 52-week and all-time highs.

Well, no problem -- the company delivered everything investors had expected and then some.

Seagate sold 61 million drives in the third quarter for a total of $4.4 billion, right in line with analyst targets. Trickling down the income statement, that 65% year-over-year revenue boost resulted in $2.64 of non-GAAP earnings per share. That's up from $0.25 per share in the year-ago quarter -- I'd give you the percentage increase here if I weren't so afraid of heights -- and way above the Street's $2.11 consensus estimate.

Anything less than a blowout quarter could have sent Seagate's shares behind the woodshed for a comprehensive beating; instead, shares gained 3.5% in early trading.

The company enjoyed a 37% gross margin this quarter, up from 32% last quarter and 19% a year ago. This is an astronomically high profit share, historically speaking. Archrival Western Digital (NYSE: WDC) also collected a superb 32% gross margin last quarter, so it's obvious that the flooding disaster that disrupted the hard drive supply chain last year actually didn't hurt the industry's collective bottom line.

Looking ahead, CEO Steve Luczo believes that the industrywide supply of drives for notebooks and parts of the enterprise market have recovered already, although pockets of supply/demand imbalance still remain. Desktops will still see some supply-side constraints well into the fall. The exploding market for cloud-computing infrastructure makes it hard to keep up with rising demand for drives with very large storage capacities.

As good as this report was from Seagate's point of view, it sends mixed messages about the rest of the computer industry. If hard drives aren't holding notebook sales back, that's obviously good news for leaders in the market like Hewlett-Packard (NYSE: HPQ) and Dell (Nasdaq: DELL). But both of those companies also sell plenty of desktops and servers, two markets where Seagate and friends still play the part of marketwide speed bumps.

In most cases, it all comes out in the wash. Look to Thursday's report by Microsoft (Nasdaq: MSFT) for a deeper understanding of how hard drive limitations are affecting total system sales. Mr. Softy plays in every corner of the IT sandbox and should be able to break down exactly what's going on here.

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