by Adam Armstrong

Seagate Releases 4Q & Year End Financial Results

Today Seagate Technology reported its fourth quarter 2017 financial results (quarter ending on June 30, 2017) and its year-end financial results. While the results in and of themselves weren’t terrible their stock plunged more than 16% after their earnings were out as the company missed expectations. Further, long time CEO, Steve Luczo, will be transitioning out of his position.

Looking at the numbers for the quarter, Seagate is reporting a revenue of $2.4 billion, down from last quarter’s $2.7 billion. The company is reporting a GAAP net income of $114 million (or a diluted EPS of $0.38) and a non-GAAP net income of $119 million (or a diluted EPS of $0.65). Gross margin was 27.7% GAAP and 28.9% non-GAAP, both continuing to fall over the past few quarters. Cash flow from operations was $243 million down from $426 million in the last quarter.

For the year, Seagate is reporting $10.8 billion in revenue down from $11.2 billion the year prior. The company had a gross margin of 29.5% up form 24.6% in 2016. Seagate is reporting a net income of $772 million up from last year’s $684 million. The company also states that they have generated approximately $1.9 billion in operating cash flow and paid cash dividends of $561 million. Seagate’s board of directors have also approved of a quarterly cash dividend of $0.63 per share, which will be payable on October 4, 2017 to shareholders of record as of the close of business on September 20, 2017.

It doesn’t look terrible for Seagate, but the company missed estimated EPS by nearly 30 cents. Steve Luco, the CEO, stated that the company saw short-term fluctuations in demand for Seagate's data storage technology amid higher prices in the memory market. He also announced that he would be transitioning away from the CEO position to executive chairman, while Dave Mosley, the current President and COO, will be appointed CEO. On top of this, Seagate announced that it would be cutting 600 jobs.

Missing expectations combined with leadership transitions and layoffs drove the stock down sharply. While the company is fairly stable and in no immediate pressure to change, it is curious to us at StorageReview what they long term outlook will be. The company has very little flash technology (compared to the competition), what it has is mostly partnership deals with other companies, and does not seem to be in any hurry to move in the flash direction the rest of the market has turned to. Breaking down the companies revenue by product type, Seagate separates its HDD into one category and everything else into the other including enterprise systems and SSDs. Looking at the trends over the last few years, the company’s other category, including flash, has been shrinking in revenue currently only making up less than 8% of its total revenue. While spinning disks will always have a place in the industry, it has been dethroned by flash as king, and the next technological breakthroughs will just move HDDs further down the pecking order. 

Seagate Investor Relations

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