Is This the Recession's Next Tech Victim?

Ford and General Motors may have the headlines now, but the recession has hit tech almost as hard. Among the recent losers:

Now you can add hard drive maker Seagate (NYSE: STX  ) to the list. At this week's Barclays 2008 Global Technology Conference, executives lowered fourth-quarter revenue guidance to $2.3 to $2.6 billion. Seagate had previously expected $2.85 billion to $3.05 billion, The Wall Street Journal reports.

Reuters, meanwhile, says that Seagate will shutter some facilities for the holidays to save money. CEO Bill Watkins didn't try to spin the news. "We actually had a pretty decent October and we started seeing the pullback about in the second week of November," Watkins said. "There is a lot of fear out there. I don't think anyone is very comfortable about where they are."

And yet our 120,000-strong Motley Fool CAPS community is comfortable betting on Seagate:

Metric

Seagate

CAPS stars (5 max)

*****

Total ratings

852

Bullish ratings

810

Percent Bulls

95.1%

Bearish ratings

42

Percent Bears

4.9%

Bullish pitches

142

Bearish pitches

5

Note: Data current as of Dec. 11, 2008.

"Seagate is down and disk drives have lost favor. Seagate is so savvy that when Flash equals or overtakes hard drives -- Seagate will acquire one or more of the ailing flash players and win," wrote CAPS All-Star GreatDruid last week.

I'll add that, judging by its historic levels of free cash flow, Seagate should be able to sustain its 9.40% dividend yield, offering a rare margin of safety to tech investors who've become used to cold comfort.

But that's my take. I'm more interested in what you think. Would you buy Seagate at these levels? Would you go short? Let us know using by signing up for CAPS today. It's 100% free to participate.

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Fool contributor Tim Beyers owned shares of Akamai at the time of publication. Find his portfolio holdings here and a collection of his writings here. Or connect with him on Twitter as @milehighfool.

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  • Report this Comment On December 12, 2008, at 12:57 AM, BurritoAzteca2Go wrote:

    Seagate survived the tech industry recession and came back strong after 2003. They have already seen this same thing before. They have lots of cash and we won't see any big moves until the credit markets open up and give the company a sense of what actions to take. As for Hard Drive sales, Western Digital is burning them alive. But Seagate knows where they need to improve. Namely, Laptop disk drive sales. Also, Seagate is a hip company with some interesting new FreeAgent drives with different colors. Some of which soon to be pre-loaded with a special archived collection of songs from the Greatful Dead. Bill Watkins knows his company and knows what a long strange trip its been. but, he's still the CEO and this company has value. In my opinion, this company is a bargain at its current price. Lots of growth potential in the next few years.

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