Like its now-deceased founder, Al Shugart, Seagate (NYSE:STX) has had a turbulent history.

In the early days, under the guidance of Shugart and partner Finis Connor, Seagate was the hard-drive supplier to Apple (NASDAQ:AAPL) -- back before it dropped "Computer" from its name.

But lately, Seagate, both in Silicon Valley and on the Street, has become an outsider. Investors haven't lined up to buy shares, and as late as yesterday, Foolish colleague Anders Bylund was skeptical that anything good could come from the PC disk-drive pioneer.

Then came the Q2 earnings report. The company booked $0.39 in per-share earnings after adjusting for charges related to the early retirement of debt and acquisition costs. Revenue, meanwhile, climbed 30% to just shy of $3 billion. Both figures beat expectations, and as I write, the stock is up more than 8%.

Strong guidance didn't hurt, either. Management told analysts in yesterday's conference call to expect between $0.56 and $0.60 of earnings per share in the third quarter (non-GAAP) on $2.9 billion to $3 billion in sales. For the year, executives say to expect $1.70 to $1.75 (non-GAAP) on $11.5 billion to $11.7 billion in revenue. That, again, was better than expectations.

What's driving the growth? CEO Bill Watkins said that shipments of drives for mobile computers were up 52% for the quarter. Meanwhile, the business shipped 7 million drives for consumer devices such as Microsoft's (NASDAQ:MSFT) Xbox 360.

Advanced technology is also beginning to catch on. Seagate is a pioneer of what's known as perpendicular recording, which increases the capacity of hard drives by stacking data vertically rather than horizontally. Or, as fellow Fool Shannon Zimmerman more eloquently puts it, it's "like a skyscraper rather than a strip mall."

Sales of these drives improved during Q2. Of the 41 million drives shipped to customers such as Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ), nearly 25% featured perpendicular recording. And with the new Vista operating system hogging more drive space than ever before, it's a good bet that this ratio will increase in future orders from PC makers, a situation that could help Seagate recover margin that it lost with the Maxtor deal.

Still, for all of that good news, there are troubling signs. Take inventory. (Please.) While it's down significantly from June, the stockpile is up 52% from last year -- easily outpacing sales growth. I'd see no reason to worry about this -- Seagate is absorbing a ton of Maxtor product, after all -- but then Watkins referred to the next six months as the "traditionally slower back half of the fiscal year." Or, in English, not the best time of year for an inventory buildup, especially when you're trying to rebuild margins.

Then there's cash flow. Working-capital changes butchered Seagate's ability to produce moola in Q2. Presumably, management knows that it has more to work to do bring efficiency to its operations. I'd like to see gains beginning in Q3.

Till then, I'll keep holding my shares. The company leads in a dismal, but increasingly necessary, industry. And the stock, trading for just 10.5 times estimated fiscal 2008 earnings, is still cheap. It's about time the Street recognized that. Welcome back to the party, Seagate.

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Fool contributor Tim Beyers, ranked 954 out of more than 20,700 in Motley Fool CAPS, is a sucker for cool gadgets. That's why he's the proud owner of a MacBook Pro, on which he typed this story. Tim owns shares of Seagate. Get the skinny on all of the stocks in his portfolio by checking Tim's Fool profile. Microsoft and Dell are Inside Value selections. Dell is also a Stock Advisor pick. The Motley Fool's disclosure policy is the life of the party.