Hard disk drive maker Seagate Technology (STX) said Tuesday after the markets closed that its first quarter profit more than tripled from last year, as improved margins and lower operating costs offset a 12% revenue drop and other charges. The company's quarterly earnings per share, excluding items, also came in above analysts' expectations. The company provided a second quarter revenue forecast range, the mid-point of which is above analysts' current consensus estimate.
The Grand Cayman, the Cayman Islands-based company reported net income for the first quarter of $179 million or $0.35 per share, compared to $57 million or $0.12 per share for the year-ago quarter.
The latest quarter results include $10 million of purchased intangibles amortization, $46 million of restructuring and a write down of long-lived assets of $64 million. The aggregate impact of these items is $120 million or $0.23 per share.
On average, 20 analysts polled by Thomson Reuters expected the company to earn $0.47 per share for the first quarter. Analysts' estimate typically exclude special items.
Gross margin for the first quarter improved to 24.5% from 17.2% a year earlier. Total operating expenses for the quarter declined 17% to $2.44 billion from $2.95 billion last year.
Revenue for the first quarter fell 12% to $2.66 billion from $3.03 billion in the same quarter last year. Seventeen analysts had a consensus revenue estimate of $2.62 billion for the first quarter.
The company shipped 46.3 million disk drive units in the first quarter, down from 48.0 million units shipped in the prior year quarter.
"At a time when economic conditions remained challenging we are very pleased with the company's financial performance, delivering strong revenues, margins and cash generation," said Steve Luczo, Seagate CEO. "The company has returned to its operating model well ahead of our expectations of six months ago and now expects to sustain gross margin of 22-26%."
Last month, Seagate had said it expected first quarter revenue to be at or slightly above the high end of its earlier guidance of $2.4 billion to $2.6 billion, as overall demand for products showed strengthening.
During the first quarter, Seagate reduced short-term borrowings and long-term debt by about $465 million mainly with the maturity of its $300 million floating rate senior notes and by paying down its revolving credit facility by $150 million. Subsequent to the end of the first quarter, the company paid off the remaining balance of its revolving credit facility of $200 million and made open market purchases of $20 million, bringing the total debt reduction during fiscal 2010 to about $685 million.
Looking forward to the second quarter, the company expects revenue to be in the range of $2.75 billion to $2.85 billion and gross margin to be near the high end of its targeted range of 22% to 26%. Analysts currently expect the company to post revenue of $2.75 billion for the second quarter.
The guidance is based on the company's projection of overall industry demand for disk drives in the range of 153 million to 160 million units for the second quarter.
Seagate shares, which have traded in a range of $2.98 to $16.40 over the past year, closed Tuesday's regular trading session at $15.55, unchanged from previous close, but lost 20 cents or 1.29% in after hours trading.
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