Seagate updates outlook in light of the Thailand Flooding

Seagate Technology plc., updated its financial outlook for the December 2011 and March 2012 quarters. The company continues to believe that, due to the industry impacts caused by the extensive flooding in Thailand, hard disk drive supply will be significantly constrained for several quarters. For the December 2011 quarter, the company believes the industry will ship between 110-120 million units.

The company believes the industry’s ability to manufacture and ship hard disks drives will gradually improve throughout calendar 2012. While this may alleviate some of the unit demand shortfall, it is expected that some companies will optimize unit shipments by manufacturing lower component count/lower capacity hard disk drives; thereby, only modestly offsetting the growing petabyte shortage. Because demand is estimated to significantly exceed supply during this time, pricing is expected to remain stable.

Financial Outlook
The company’s component and disk drive factories in Thailand have not been directly affected by the flood; however, the company’s ability to manufacture hard disk drives has been impacted due to external component supply constraints as first disclosed on October 12, 2011.

For the December 2011 quarter, the company now expects unit shipments of approximately 43 million units and revenue of approximately $2.8 billion. Gross margin as a percent of revenue is expected to be 150-300 basis points above the high-end of the company’s long-term, targeted gross margin range of 22-26%. Operating expenses (R&D and SG&A) are expected to be approximately $400 million. Expenses related to the acquisition of Samsung Electronics Co., Ltd’s (“Samsung”) hard disk drive business and any revenue or operating expenses of the acquired business following the closing date cannot be estimated at this time and are therefore excluded from this outlook. The company continues to expect to close the acquisition of Samsung’s hard disk drive business by the end of December 2011.

The company’s outlook for the March 2012 quarter assumes requisite regulatory approvals are received and the Samsung acquisition closes in December of 2011. The company also continues to work with its external suppliers to restore the component supply chain, and now expects that in the March quarter it will be capable of shipping a mix of products in terms of capacity per drive and expected market similar to pre-flood levels.

Currently, for the March 2012 quarter, the company expects unit shipments to increase sequentially. Revenue is expected to be at least $3.75 billion and gross margin as a percent of revenue is expected to be at least 300 basis points above the aforementioned targeted range of 22-26%. The outlook for the March 2012 quarter excludes certain costs related to the integration of the acquired Samsung hard disk drive operations which cannot be estimated at this time.

The financial outlook provided today does not include the arbitration award previously disclosed on November 21, 2011.

Source: Press Release