Storage device maker Seagate Technology (NASDAQ: STX) reported a marked decline in first-quarter earnings as the continuing slump in the demand for flash memory weighed on revenues. Earnings topped the Street view. The stock dropped during Friday’s pre-market trading, immediately after the announcement.
First-quarter adjusted earnings plunged 41% to $1.03 per share but exceeded analysts’ consensus estimate. Net income, on a reported basis, was $200 million or $0.74 per share, compared to $450 million or $1.54 per share last year.
Top-line Crashes
Dragging the bottom-line, revenue fell 14% annually to $2.58 billion during the three-month period. Analysts were looking for a slightly faster decline. Exabyte shipments rose to near-record levels during the quarter helped by an uptick in the demand for mass capacity storage, which was offset by weakness in the other product categories.
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“We continue to gain momentum with these products, which deliver lower total cost of ownership to our customers. While business conditions remain challenging over the near-term amidst ongoing geopolitical uncertainties, our innovative technology roadmap makes us well positioned to capture current and future mass capacity storage demand while also driving long-term value for our shareholders,” said CEO Dave Mosley.
Mosley cautioned that business conditions would remain challenging in the coming months, due to the geopolitical uncertainties.
Outook
For the second quarter of 2020, the management forecasts revenue of $2.72 billion, plus or minus 5%. The guidance for adjusted earnings is $1.32 per share, plus or minus 5%.
During the first quarter, Seagate repurchased 9.2 million shares for $450 million and raised the quarterly cash dividend to $0.65 per share, to be paid on January 8, 2020.
Shift in Focus
Of late, Seagate has as been selling higher-capacity hard disk drives (HDD) to cloud service providers who are looking for affordable alternatives to SSDs. The strategy has helped it overcome the stress on margins due to falling flash memory prices.
Related: Seagate Q4 2019 Earnings Conference Call Transcript
Seagate shares had a positive start to 2019 and maintained the uptrend since the beginning of the year. The stock closed the last trading session higher, but lost sharply early Friday following the quarterly report.