Flash Woes
The continuing fall in the prices of flash memory, due to faltering demand for NAND chips and oversupply, is the biggest challenge facing the company. Also, competition from industry rivals like Samsung and Western Digital (WDC) has intensified.
While the general weakness in demand will continue to be a drag, the growing market for smartphones with high storage capacity is good news for the industry. Considering the cyclical nature of the sector Seagate represents, demand is bound to recover helped by the rapid adoption of mass data storage systems. To grab the opportunity, Seagate has been focusing on high capacity storage devices capable of supporting large cloud computing systems.
Positive Factors
With claims of having shipped the first-ever 16-terabyte drives in the March quarter, the management earlier issued upbeat guidance for the second half of the year, when it expects to leverage the popularity of mass data storage systems.
Related: Seagate Q3 2019 Earnings Conference Call Transcript
Another factor that could aid Seagate’s revenue growth in the to-be-reported quarter is the recent launch of upgraded IronWolf hard disks with significantly higher capacity. Of late, the company has been witnessing a marked increase in the shipments of 12-terabyte products and a sequential improvement in the average capacity per drive.
Q3 Results
Earnings of the Cupertino, California-based tech firm dropped sharply to $0.83 per share in the third quarter, owing to a decline in revenues, but came in above the estimates. At $2.3 billion, the top-line fell short of expectations.
Also see: Verizon Q2 profit beats Street view on wireless strength
Western Digital this week reported a decrease in fourth-quarter adjusted earnings to $0.17 per share, reflecting a double-digit contraction in revenues to $3.6 billion. The weakness is attributable to the falling demand for flash memory.
Though Seagate’s shares regained strength early this year, after slipping to a low last year, the momentum waned in recent weeks. The stock gained about 19% so far this year. It has lost about 14% in the past twelve months.