STX

[qma]

today reported record quarterly revenue of $2.3 billion, net income of $287 million, and diluted earnings per share of $0.57 for the quarter ended December 30, 2005. Included in these results are expenses of $20 million for non-cash stock based compensation and a $6 million one-time charge associated with a licensing arrangement Seagate entered into during the quarter. These results compare to revenue of $1.85 billion, net income of $144 million and diluted earnings per share of $0.29 in the year-ago quarter. The year-ago results did not reflect costs associated with non-cash stock based compensation.

For the March quarter, Seagate expects to report revenue of approximately $2.25 billion, and diluted earnings per share of approximately $0.55, excluding expenses associated with non-cash stock based compensation. Non-cash stock based compensation is expected to be approximately $21 million or $0.04 per share, equating to GAAP earnings per share of approximately $0.51.

For fiscal year 2006, Seagate now expects to report earnings per share in the range of $2.20 - $2.25, excluding charges for non-cash stock based compensation. Charges for non-cash stock based compensation are expected to be approximately $0.16 per share, which equates to GAAP diluted earnings per share in the range of $2.04 - $2.09. This compares to Seagate's previously stated fiscal year guidance of approximately $2.00 per share or approximately $1.84 per share when including charges for non-cash stock based compensation. The annual outlook incorporates a 5% tax rate during the March and June quarters.

The company has declared a quarterly cash distribution of $0.08 per share to be paid on or before February 17, 2006 to all common shareholders of record as of February 3, 2006.

[Michael]

Hi qma

I am not sure what 3SOF member consider to be a great stock but STX certainly fit my description!

• 25% revenue growth
• 100% increase in net income
• raised guidance for 2006
• a forward PE of 12

Tomorrow will be another great day for Seagate (IMHO).

Mike

[la-onda]

STX: Matrix Ups to Strong Buy from Buy; Analyst Notes
Thursday , February 09, 2006 09:18 ET

Issuer: Seagate Technology (NYSE: STX)

Analyst Firm:  Matrix

Ratings Action: UPGRADE

Current Rating: Strong Buy (from Buy)


Analyst Comments: The firm believes the recent pullback provides an opportunity given strong desktop demand.

This rating information was reported by TheFlyOnTheWall.

[Michael]

It has been an amazing run for STX. We have gone from 14 to 27.4 almost without rest:



But the most amazing thing is that even after this double KCScott's headline is still as valid as it was 6 month ago. STX is still undervalued and what stock doesn't need TA 

STX is trading at a PE of 12.8 compared to an industry average of 30.4 and a price/cash flow of 8.6. The following chart is from Morningstar and does not include December quarter hence the higher PE (STX profit doubled in Q2 and they guided up).



With the consolidation of the industry and the aggressive targeting of consumer goods including mobile phones with the 1 inch HDD the industry is in a strong growth period.

Western Digital is trading at a PE of 19 and is growing slower than STX. From a fundamental point of view STX as the market leader should have a PE above 20 or a PPS of at least 43.

From a TA point of view we made a 52-week high yesterday and today on reasonable good volume and MACD has just turned positive. RSI indicates that we are entering overbought territory. We have been there before for extended periods so I am not too alarmed about that. I am not a great technical trader but for me the chart looks good.

And I almost forgot my favorite topic the poor short community. They made the unfortunate decision to short 12 million shares (give and take a few) on December 21st when the Maxtor merger were announced. Guess what the market loved the merger and these guys are now in the red with 98 million USD. The total short position is 22.8 million shares and a a very rough calculation says that they have lost at least 250 million USD.

The question is how long time they will sit and see STX make new highs before we start seeing some serious short covering. Streetwalker picked STX as one out of 5 short squeeze plays: http://www.forbes.com/2006/02/13/streetwalker-stocks-investing-cz_jr_0214streetwalker7.html?partner=yahootix

Buy STX due to the excellent fundamentals. A short squeeze will just make them reach the target faster.

Mike

[la-onda]

awesome pick Mike, unfortunately no money left to invest!
your price target?

cheers
Oliver

STX: $0.08 Cash Dividend Payable Today
Friday , February 17, 2006 07:00 ET

According to the NYSE Corp Action List, today is the expected Payment Date for the $0.08 cash dividend previously declared for Seagate Technology (NYSE: STX).

  DECL-DATE          X-DATE        REC-DATE        PAY-DATE
-----------     -----------     -----------     -----------
01/18/2006      02/01/2006      02/03/2006      02/17/2006

AMOUNT:    $0.08 cash (USD)
FREQUENCY: QUARTERLY (based on history)
CHANGE:    CONTINUATION of regular dividend

&

SSeagate and Maxtor Announce Expiration of Hart-Scott-Rodino Waiting Period for Proposed Acquisition
Tuesday , February 14, 2006 07:01 ET

Feb 14, 2006 /PRNewswire via COMTEX/ -- SCOTTS VALLEY, Calif. and MILPITAS, Calif., Feb. 14 /PRNewswire-FirstCall/ -- Seagate Technology (NYSE: STX) and Maxtor Corporation (NYSE: MXO) today announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, with respect to the proposed acquisition of Maxtor by Seagate, has expired. As a result, no further anti-trust regulatory review of the merger will be necessary in the United States. As previously announced, the transaction is subject to other customary closing conditions and regulatory approvals by the competition review authorities of the European Union and several other jurisdictions as well as authorization by shareholders of both companies. Both parties continue to expect the transaction to close during the second half of 2006, following approval from shareholders of both companies and the satisfaction of all other closing conditions.

[qma]

The ex-Dividend Date is 02/01/2006, so you need to be in before that day to receive $0.08/share dividend. The money has not distributed yet, but should be in sometime nextweek.

The greenlight for the STX/MXO merge is significant, which really ensure the leadership of STX on the storage market. Expect to pay more for the PC hard disk. |o|

 

[la-onda]

fyi:

STX: Short Interest UP 7.4% to 24.5M in Feb 2006
Wednesday, February 22, 2006 17:56 ET

According to new short interest data from NYSE, short interest for Seagate Technology (NYSE: STX) INCREASED 7.4% to 24,496,667 shares for the month ended mid-February, 2006.

SYMBOL     JANUARY        FEBRUARY          CHANGE       %CHANGE      DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
STX           22,800,291      24,496,667      +1,696,376        +7.44%           4

Based on STX's 20-day average daily share volume of 6,604,060, it would require approximately 4 day(s) of buying to cover this short interest.

[Michael]

Hi Oliver,

What a shame you don't have money for the ticket to this journey but at least you are on board on the KOMG travel

We made a new 52 week high yesterday:



As with KOMG this is a very simple pick. 4 month ago most analysts expected that the Hard Disk Industry would go out of fashion and that the HDD companies would suffer as a consequence. In fact this whole thread started because STX probably was one of the most depressed charts out there!

The analysts were bloody wrong and now they are stumbling over each other to correct the mistake. From being a sector out of fashion it has suddently become a sector that everybody wants to be in.

I posted an article from TrendFOCUS Report yesterday in the KOMG thread: HDD Industry Gets Even Hotter in 2006: http://www.3stocksonfire.org/trading/index.php?topic=2545.msg49461#msg49461

Here is a an article from Investor Business Daily:

More Storage In More Places
BY BRIAN DEAGON

INVESTOR'S BUSINESS DAILY

Posted 3/3/2006

The once unglamorous field of computer storage is back in fashion.

Facing a range of pressures, chief information officers are scrambling to improve the way they store information. And that's brought a windfall to makers of disk drives and other storage gear.

The current frenzy began in the wake of 9-11. As plumes of dust and smoke smothered the lower Manhattan skyline after the World Trade Center attack, sheets of paper fluttered down like feathers. That spotlighted the vulnerabilities of companies' data.

Fortunately for many firms hit by the attack, essential information had been copied onto computers elsewhere the night before.

But the event helped raise awareness about the need for secondary backup storage.

Legislation enacted by Congress the past few years also helped spur the storage industry.

New rules, such as the Sarbanes-Oxley Act of 2002, require companies to retain more of their data. That necessitates more storage.

Also, information in general is being created at an unprecedented rate.

The world is becoming digitized. That includes the digitization of pictures and video, which eat up lots of disk drive space.

These trends help explain why companies like EMC (EMC) shipped more storage capacity in 2005 than during the entire period between 2000 and 2003. EMC makes industrial strength storage systems crammed full of disk drives. Companies use them to store and network their data.

In 2005, EMC sales rose 17.4% to $9.7 billion. Earnings rose 27%.

"In the last five years, we've seen 60% to 70% growth in the amount of data companies store on disk systems," said Howard Elias, EMC executive vice president of corporate marketing.

A shift to doing business at all hours also has helped drive storage sales. "It's a 7-by-24 world," Elias said. "Customers demand that information be available all the time. They don't want to wait."

1. Business

The storage industry is comprised of several distinct businesses. First are the disk drives — made by seven major players, including Seagate Technology, (STX) Western Digital (WDC) and Hitachi's (HIT) Global Storage unit.

EMC, Hitachi Data Systems, Hewlett-Packard (HPQ) and IBM (IBM) use those drives in their big storage systems. The refrigerator-sized systems store, on average, 20 terabytes of data. One large company might have dozens of them. One terabyte is 1,000 gigabytes, the information equivalent of 1,000 pickup trucks filled with books.

A subset to this type of storage is smaller storage systems, which are usually deployed in departments. Network Appliance (NTAP) and EMC ( EMC) are leaders in this field.

Storage software also is vital to the industry. It helps storage systems manage data and tie into the rest of the network. Software, in fact, is the fastest-growing segment of the storage market — and it's where acquisition activity is the most intense.

Another industry segment: providers of tape drives and tape storage systems. The two leading companies in this field are Imation (IMN) and StorageTek, which was acquired by Sun Microsystems (SUNW) last year for $4 billion.

In terms of storage per dollar, tape systems offer the best value. But they are slower than disk-based systems.

Hence, companies tend to put their most vital data on disk storage. They then move the information over to tape as it ages and needs to be accessed less frequently.

Then there are the industry's equipment suppliers. Disk drives are finely tuned and highly engineered products that include disk platters and recording heads.

Suppliers in this market include Komag (KOMG) and Hutchinson Technology. (HTCH)

The data storage industry has suffered through severe boom-and-bust cycles. And the number of industry players has fallen sharply since the 1980s, when more than 130 companies duked it out.

Most crashed or merged, leading to the seven survivors.

Industry consolidation has brought stability, but the race to develop new products and speed them to market is as intense as ever.

Name Of The Game: With a handful of giants fighting for a slice of the market, there's little room for delays or mistakes. The industry moves at light speed, so falling behind on a product cycle can wreak a devastating blow.

2. Market

Businesses have put a big emphasis on beefing up their storage capacity. They're also looking for better ways to manage data to improve efficiency.

That's been great news for storage makers, who are ringing up record sales.

U.S. factory sales of disk storage systems grew 18% to $4.7 billion in the fourth quarter. Worldwide, sales rose 13% to $6.8 billion, according to International Data Corp.

Seagate estimates that the industry shipped 380 million disk drives last year. All together, those drives had 35 million terabytes of capacity, up 60% from the previous year.

The most exciting area for growth comes from the consumer electronics field, where new applications are constantly emerging.

Disk drive companies are doing a brisk business selling drives to makers of digital video recorders, such as TiVo. (TIVO) Apple Computer's (AAPL) iPod also uses disk drives.

And digital cameras, cell phones and cars hold big potential for the disk drive industry.

"We're devoting a great deal of financial resources to drives for consumer electronics," said Dirk Thomas, a vice president at Hitachi Global Storage Technologies.

3. Climate

Aside from pushing fast into the consumer electronics market, the data storage industry has its sights on an emerging concept called virtualization.

It represents a fundamental shift in how information is managed at the corporate level.

The idea is to create several virtual computers within one computer. Or, conversely, several computers can be stitched together to create one giant supercomputer. Either way, you use as much or as little computing power as you need.

Related concepts go by several names, including grid computing, on-demand computing and utility computing.

The storage industry is jumping on this bandwagon with virtualization software. It's designed to let companies store and manage all their data on large networks — even if they're running many types of operating systems and computer platforms.

Storage companies have been acquiring software companies that specialize in virtualization. EMC picked up VMware for $625 million in 2004. That company specializes in virtual computing software for Intel-based servers.

And in August, EMC acquired Rainfinity, another virtualization software company.

IBM has invested more than $1 billion in this field as well. And Hitachi and Hewlett-Packard are pushing hard into the area.

"It will be a significant change in the way information is managed," Elias said.

4. Technology

One of the hottest trends in disk drive technology is perpendicular recording.

Analysts call it the biggest advancement in disk drives in 15 years. It will allow disk drive manufacturers to increase the amount of data that can be put on a disk by 30% and more.

The current recording method stores bits of data side by side. It's called longitudinal recording, and it's been the standard technique since IBM invented the disk drive 49 years ago. But bits are now so tightly packed that space is running out.

Perpendicular solves that problem because the data are stacked vertically.

Laying the bits up and down instead of side by side provides more room. The approach let Seagate build a 2.5-inch-wide, 160-gigabyte drive that fits snugly into notebook computers.

5. Outlook

In their latest quarterly reports, EMC, Seagate and Network Appliance all gave positive outlooks.

"Looking into 2006, I am bullish on the economic front," said Joseph Tucci, EMC chairman, president and chief executive, during a conference call. "Surveys show these companies will significantly increase capital expenditures in 2006."

Daniel Warmenhoven, chief executive of Network Appliance, said, "We have many reasons to be optimistic about our future."

Upside: Perpendicular recording and virtualization should drive sales for storage firms in the coming years. These advancements could provide a compelling return on investment for buyers.

And there's one constant that will always help the storage industry: Data creation grows larger and faster every year.

"We saw continued acceleration of disk storage systems growth throughout 2005," said Brad Nisbet, research manager at International Data Corp.

Risks: The one problem that has always faced the disk drive industry is overproduction.

With fewer players in the market today, that risk is smaller. And price declines on older drives have not been as severe as in the past.

But competition remains tight, and if one manufacturer decides to launch a price war, it could bring down the profitability of the whole industry.

My prefered picks in the HDD sector is STX and KOMG but I am looking to add one or 2 more stocks. (I am fully loaded with KOMG and STX!)

Mike

[la-onda]

STX: Am Tech Ups to Buy from Hold; Ups Tgt to $30 vs $28; Analyst Notes
Wednesday, March 15, 2006 09:02 ET
Issuer: Seagate Technology (NYSE: STX)
Analyst Firm:  American Technology Research
Ratings Action: UPGRADE
Current Rating: Buy (from Hold)
Target Price Action: INCREASE
Target Price: $30.00 (+7.14% from $28.00)
Analyst Comments: The firm believes price war concerns are overdone and industry checks indicate that pricing in desktop HDD's is milder than normal. Expects rational pricing for the industry going forward with MXO eliminated as a competitor.

rebound @ EMA50

[la-onda]

update BEFORE earnings:
Seagate Likely To See 2007 Upside From Maxtor Buy
Maya Roney, 04.18.06, 8:47 AM ET

Lehman Brothers raised its price target on Seagate Technology to $31 from $30, citing continued solid execution and the company's recent accretive acquisition of rival hard drive maker Maxtor Corp.

"We believe Seagate will continue to generate revenue growth in excess of the industry, likely see upward revisions in street expectations in earnings per share in calendar 2007 due to Maxtor-related merger synergies, and potentially enjoy an expanding price-to-earnings multiple," wrote analyst Harry Blount in a note Monday.

Blount estimates potential earnings-per-share accretion in the second year of the Maxtor acquisition to be north of 50 cents per share, assuming normal PC demand. Last Thursday, Seagate filed an S-4 suggesting that the acquisition could close around May 17.

The analyst expects Seagate to report March results that are in-line of better than consensus and guidance of earnings of 50 cents per share on revenue of $2.25 billion due to better-than-normal seasonality related to better industry demand and likely share gains in notebook, desktop, enterprise and consumer electronics.

Blount maintained an "overweight" rating on the stock.

"Seagate's valuation remains well below other leading IT hardware companies despite comparable to better industry growth prospects, financial returns, and capital intensity," he added.

[la-onda]

1)
Seagate Technology Reports Fiscal Third Quarter 2006 Results
Tuesday , April 18, 2006 16:05 ET

SCOTTS VALLEY, Calif., April 18, 2006 /PRNewswire-FirstCall via COMTEX/ -- Seagate Technology (NYSE: STX) today reported quarterly revenue of $2.3 billion, net income of $274 million, and diluted earnings per share of $0.53 for the quarter ended March 31, 2006. Included in these results are an expense of $21 million for non-cash stock based compensation and a $7 million one-time investment gain. These results compare to revenue of $1.97 billion, net income of $229 million and diluted earnings per share of $0.45 in the year-ago quarter. The year-ago results did not reflect costs associated with non-cash stock based compensation.

For the nine months ended March 31, 2006, Seagate reported revenue of $6.7 billion, net income of $833 million and diluted earnings per share of $1.63. This compares to revenue of $5.4 billion, net income of $427 million and diluted earnings per share of $0.85 for the nine-month period ended April 1, 2005.

"I'm pleased to report yet another quarter of strong operational and financial results. Seagate enjoyed significant year-over-year unit and revenue growth, fueled by continued robust demand for our products across all markets, particularly in notebook and consumer electronics applications," said Bill Watkins, Seagate president and chief executive officer. "Our strong sales of 2.5-inch disc drives during the quarter propelled us to number two in market share in under three years participation in this space. We also just announced the industry's first enterprise drive based on perpendicular recording, allowing us to now deliver the benefits of drives based on perpendicular technology to three of the key markets we serve: consumer, enterprise and mobile computing.

"Overall, we are seeing more consumers and applications than ever before creating, using and sharing digital content. There is also a rapidly growing trend to make that content available on-demand, replacing physical distribution with digital distribution and placing Seagate hard drives squarely at the center of a growing global phenomenon. This growth and diversity in content use and delivery has had a positive impact across all storage markets, and contributed to the fact that 30% of our revenue in the March quarter came from sales outside of markets associated with PC microprocessor shipments; that's nearly double the amount from just two years ago. Going forward, we see profound, ongoing opportunities for storage and believe Seagate is uniquely positioned to leverage these opportunities and to strengthen our position as the global storage leader."

Consumer Electronics Products

Seagate experienced strong growth in the consumer electronics (CE) market in the March quarter, shipping 4.7 million drives, an increase of 12% from the year-ago quarter and 33% sequentially. Shipments into DVR applications grew over 100% year-over-year to 2.5 million units, while shipments into the gaming market increased 39% over the same period.

Mobile Computing Products

Demand for Seagate products in the mobile computing market reached record levels as the company shipped 3.8 million disc drives, representing an increase of 112% from the year-ago quarter and 30% sequentially. Seagate grew overall share in this space for the 7th consecutive quarter. During the quarter, Seagate began volume shipments of its industry-leading 160GB 2.5-inch disc drive utilizing perpendicular recording technology. Given Seagate's growing strength in the high-capacity portion of this market, the company's shipments of capacity points at 80GB and greater grew sequentially 26%. Also during the quarter, industry average capacity in this space grew to over 60GB, while Seagate's average capacity reached almost 70GB.

Enterprise Products

Seagate extended its leadership in the enterprise space during the quarter, shipping 3.5 million units. Seagate has now expanded its industry- leading portfolio of enterprise drives with the industry's first enterprise disc drive utilizing perpendicular recording technology. The 15,000 RPM, 300GB, Cheetah 15K.5, delivers 30% better performance over previous versions and doubles the capacity of any 15,000 RPM drive on the market. The new drive will be in qualification at several OEMs this quarter.

Desktop Products

Seagate continued its leadership in the desktop storage space during the quarter by shipping 17.5 million desktop drives, an increase of 12% from the year-ago quarter. Channel sales for Seagate desktop products remained healthy throughout the quarter and Seagate exited the quarter with under five weeks of distribution channel inventory.

Pricing

The average selling price for all Seagate products, on a blended basis, decreased approximately $2.00 from the December quarter. In aggregate, price decreases on a "like for like" product basis during the March quarter were typical for a March quarter and in line with the company's expectations at the beginning of the quarter.

Business Outlook

The following outlook for the June quarter and fiscal year 2006 reflects only the financial results of Seagate Technology and does not include any financial results for Maxtor. If the proposed acquisition of Maxtor is closed during the June quarter, the reported results for the quarter will include the financial results of Maxtor from the date of closure through the end of the quarter and transaction related financial impacts.

For the June quarter, Seagate expects to report revenue of $2.1-2.25 billion, and diluted earnings per share of $0.46-0.49, excluding expenses associated with non-cash stock based compensation. Non-cash stock based compensation is expected to be approximately $23 million or $0.04 per share, equating to GAAP earnings per share of $0.42-0.45.

For fiscal year 2006, Seagate expects to report earnings per share in the range of $2.21-$2.24, excluding expenses associated with non-cash stock based compensation. Non-cash stock based compensation is expected to be approximately $80 million or $0.16 per share, equating to GAAP earnings per share of $2.05-$2.08.

Dividend

The company has declared a quarterly cash distribution of $0.08 per share to be paid on or before May 19, 2006 to all common shareholders of record as of May 5, 2006.

Conference Call

Seagate will hold a conference call to review the fiscal third quarter results at 2:30 p.m. Pacific Time today. The conference call can be accessed online at seagate.com or by phone as follows:

USA:  877-223-6202
International:  706-679-3742

2)

Seagate Technology Halted -Tops Q3 Estimates But Sees Q4 In Line to Lower
Tuesday , April 18, 2006 16:27 ET

Boston, Apr 18, 2006 (MidnightTrader via COMTEX) -- Seagate Technology (STX) says FYQ3 sales were $2.3 billion, more than the FC mean for $2.253 billion. It earned $0.53 per share, including stock compensation expense. The FC mean less items was $0.52 per share. Q4 sales are seen between $2.1-2.25 billion, in line with the FC mean for $2.23 billion. EPS without items are seen between $0.46-0.49, in line to below the FC mean for $0.49. FY06 EPS less items are seen between $2.21-$2.24, above the FC mean for $2.11. It declared a quarterly cash distribution of $0.08 per share to be paid on or before May 19 to all common shareholders of record as of May 5.

[la-onda]

Any comments on the results and analysis? time for entering if price is dropping down?

yahoo quotation:
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&sid=1602527417&mid=34777

Analysis 1:

Lowering Rating From Outperform To Peer Perform On Weaker
Near-term Outlook; Lowering Estimates
While we continue to view STX's strategic move to acquire MXO favorably and remain
positive about the long-term prospects for the drive industry, we are lowering our rating on
STX from Outperform to Peer Perform given STX's weak outlook and negative data points at
the margin, which, coupled with pending integration of MXO, could temper STX's near-term
performance. As to collateral impact, while both WDC and KOMG are likely to see weakness, we're  maintaining our Outperform rating for both since WDC is likely to gain share from
MXO/STX merger (though lower pricing could offset some upside) and KOMG should
benefit from the uptick in demand at WDC and continued constraints in media.
Relative to the sector, we continue to have a favorable view: media constraints are acting as a
gaiting factor in promoting price discipline and consolidation is likely to lead to further
stability. However, history has shown that HDD sector tends to outperform with upward
estimate revisions (as opposed to cuts).
STX reported 3Q06 post-option EPS (ex $7mm in one-time investment gain) of $0.51, in line
w/ our est but below Street at $0.52, despite reporting revs of $2.28bn, which was ahead of
our/Street est, owing to lower margins from mix shift. STX also saw more aggressive pricing
in desktop HDDs with channel inventory increasing from 3.8 to 4.8 wks.
Reflecting STX's weaker outlook, we are lowering our FY06 post-options EPS from $2.09 to
$2.06, FY07 EPS from $2.37 to $2.09, and FY08 EPS from $2.91 to $2.61. We are lowering
our 4Q06 post-options EPS from $0.46 to $0.42.
As for valuation, using a 10x-11x P/E (lowered from our prior 11x-12x P/E assumption due
to weaker outlook and potential MXO integration issues), we arrive at a CY06 year-end fair
value of $28-$31 (reduced from $34-$38). We note that the sector tends to trade more in line with direction of the earnings momentum rather than specific valuation target.
Lowering STX Rating From Outperform To Peer Perform. We are lowering our rating of STX from Outperform to Peer Perform owing to STX's weaker-than-expected outlook, as well as our concerns about negative data points that, coupled with potential issues stemming from the integration of MXO, could temper STX's near-term performance.

These negative data points include:
• Higher-than-expected price erosion in desktops and notebooks;
• Lower-than-expected margins owing to mix shift to drives for consumer electronics (namely gaming systems), which is likely to pressure margins in the near-term;
• Increase in channel inventory from 3.8 weeks to 4.8 weeks, although still within STX's target range of 4-6 weeks;
• Pending integration of MXO, which could lead to near-term dislocation for STX.

Despite our near-term concerns, we remain positive about the long-term prospect for the drive industry and STX.
Industry dynamics remains favorable given continued media constraints that are acting as a gaiting factor in promoting price discipline with pending STX/MXO merger likely adding to the stability. STX could benefit from earlier-than-expected close of MXO acquisition, which could dampen the magnitude of revenue attrition. Depending on the timing of the European Union approval, which is schedule to issue its decision as early as April 27, STX expects to close the acquisition in late May. Otherwise, STX is likely to close the acquisition in July after its fiscal quarter end in June. Moreover, STX could benefit from its lead in new technologies (i.e., 160 GB/platter, PMR). Nonetheless, history has shown that drive stocks tend to outperform when estimates are revised upward rather than when they are being cut.
As to collateral impact, while both WDC and KOMG is likely experience weakness, we believe that factors that could temper STX's near-term outlook is largely STX-specific. On the contrary, we believe that both WDC and KOMG could benefit from MXO/STX merger --i.e., WDC could gain share from MXO and STX, although lower pricing could offset some upside, while KOMG could benefit from WDC's share gains, as well as continued constrain in media.
3Q06 EPS Inline With Expectations But Outlook Disappointing. STX reported pro forma 3Q06 EPS, excluding $21 million in non-cash based compensation and $7 million in one-time licensing fee, of $0.55 (vs. $0.45 a year ago), which was inline with our estimate of $0.55 and Street expectation of $0.56, although lower tax rate (1.03% compared to our estimate of 5%) added $0.02 to EPS. Revenues of $2.29 billion, up 16% y/y, were ahead of our and First Call estimate of $2.25 billion driven by unit upside in notebook, enterprise and CE
drives offset by weaker sales of desktop drives. Blended ASP of $78 was down $2 from last quarter and was inline with our estimate. More importantly, the company provided a tepid outlook for the June quarter with EPS of $0.46-$0.49 (excluding $0.04 in options expense) on revenues of $2.10-$2.25 billion compared to our estimate of $0.51 in EPS on revenues of $2.20 billion and First call consensus of $0.52 in EPS on revenues of $2.23 billion.
Unit shipments: Total units of 29.5 million were above our estimate of 29.0 million driven by strong growth in notebook, CE and enterprise drives offset by weakness in desktop drives.

Positives:
• Mobile units came in at 3.77 million, up 113% y/y, and were above our 2.99 million unit estimate despite continued media tightness. Moreover, the company expects demand to be strong but the quarter to be seasonally down in the June quarter.
• Enterprise units of 3.51 million, up 2% year/year from 3.44 million a year ago, were above our estimate of 3.47 million unit estimate. Seagate expects enterprise demand to be in line with seasonality in 4Q06 with slight sequential decline in unit shipments.
• Consumer units came in at 4.69 million, up 33% sequentially, and above our estimate of 4.35 million owning to strong demand for drives powering DVR applications (2.5 million units were shipped or 100% growth y/y). The company noted that drive shipments to the gaming market increased by 39% y/y. Seagate shipped approximately 700,000 1-inch drives during the quarter.
• ASPs of $78 were down $2 from the prior quarter and were inline with our estimate. The company noted that it saw price erosion similar to the December quarter on a blended basis but saw higher erosion in desktop and notebook drives offset by less-than-expected declines in CE and enterprise drives.

Negatives:
• Desktop units came in at 17.48 million, up 12% y/y, but below our 18.19 million estimate. Seagate expects desktop drive shipments to decline in 4Q06 in line with seasonality.
• Desktop channel inventories stood at 4.8 weeks, up from 3.8 weeks at the end of last quarter, and was inline with Seagate's target range of 4-5 weeks.
• STX's own inventory increased by $44 million to $549 million with inventory turns down from
13.5x to 12.6x sequentially. Lowering Estimates. Reflecting STX's tempered outlook, we are lowering our estimates. Please note that our estimate forecast for FY07 and FY08 is predicated on the merger receiving regulatory and shareholder approvals since we have assumed the merger to complete during the September quarter and have reflecting its impact starting 2Q07, which could be conservative since the merger could close as early as May. STX plans to provided an updated outlook for the merged company during its analyst meeting in June 8th.

Lowering FY06 Estimates On Lower Gross Margin: We are lowering our FY06 (June) pro form EPS (excluding stock-based compensation expenses of $0.15) estimate from $2.25 to $2.21 on revenues of $8.8 billion, up 17% y/y -- at the low-end of the company's guidance of $2.21-$2.24. We are assuming unit shipment of 113.8 million (up from our prior 113.6 million units estimate) with ASP of $78 (no change) on gross margin of 25.1% (lowered from our prior 25.6% estimate).

Lowering 4Q06 Estimate: We are also lowering our 4Q06 (June) pro forma EPS (excluding $0.04 in options expenses) estimate from $0.51 to $0.46 on revenues of $2.20 billion, at the low-end of guidance of $0.46-$0.49 in EPS on revenues of $2.1-$2.25 billion.
Lowering FY07 Estimates On Lower Gross Margin: We are lowering our FY07 pro forma EPS
(excluding $0.17 from stock-based compensation expenses) estimate from $2.55 to $2.25 on revenues of $12.2 billion, up 38% y/y but lowered from our prior $12.5 billion assumption. Our estimate also includes revenue contribution from MXO acquisition. We assumed 65% of MXO's CY07 revenue estimate of $4.5 billion (or $2.9 billion) to be accretive to Seagate's FY07 revenues. In addition, we assumed cost synergies of $92 million in FY07. We are assuming gross margin of 24.4%, towards the low end of guidance range of 24%-26%.
Lowering FY08 Estimates: We are lowering our FY08 EPS (excluding $0.19 from options expense) from $3.10 to $2.80 on revenues of $13.3 billion, up 9% y/y. Our forecast reflects our assumption of 65% revenue accretion from MXO's and cost synergies of $300 million in FY08. We are estimating gross margin of 25.3%, which is slightly below the company outlook of 26%.

Valuation:
Lowering 2006 Year-End Fair Value From $34-$38 to $28-$31. We are lowering our 2006 fair
value range from $34-$38 to $28-$31 by applying a 10x-11x P/E multiple (lowered from our prior assumption of 11x-12x) on our CY07 EPS estimate. We believe that 10x-11x P/E multiple is reasonable since it is a discount to STX's historical median and WDC's target multiple of 13x and reflects our concerns about aggressive pricing in desktop drives, channel inventory increase and MXO acquisition related risks.

Analysis 2:
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&sid=1602527417&mid=34780

Slight upside to Q, but conservative guidance for June

STX reported results slightly above consensus, with revenue of $2.29B and EPS of
$0.53 beating the Street ($2.25B & $0.52). EPS was helped by a $7M equity gain
or roughly $0.02. CE and NB growth were better than our model, but offsetting
items were slightly higher ASP declines and higher diluted shares. As we
expected, mgmt gave conservative guidance for June. Overall, we believe the
quarter and June guidance reflect typical seasonality, with ASP declines at
reasonable levels.
Industry is currently healthy; seasonality is OK
STX's result and comments on the industry made us more comfortable with our
estimates for WDC. We estimate STX's ASP declines were roughly 4.6% in DT
and less in NB, which is in line with our expectations for WDC. Despite
conservative guidance the industry is healthy, with supply/demand in balance and
channel inventory in the 4-6 week range. We believe management's guidance is
prudent, and reflects the realities of a weak quarter, the distractions around
closing the Maxtor acquisition, and seasonal ASP declines.

Near-term catalysts are MXO merger, Analyst Day, and 2H product ramps
As outlined in our 4/12/06 preview note, we believe a combined STX-MXO could
conservatively earn $2.50 in FY07. With the shareholder vote now scheduled for
May 17th , we expect investors to increasingly focus on the combined EPS
numbers, which should provide upside to the shares. In addition, STX's Analyst
Day (first week of June) could drive upside and C2H product ramps of
160GB/platter DT drives and PMR-based NB drives, could provide further upside.
Shares are attractive at currently levels; maintain Buy
We are adjusting our FY06 estimates to reflect a higher share count, and our
slightly more conservative ASP assumptions. Our FY06 EPS estimate is now
$2.06, versus our prior $2.08. Our FY07 EPS estimates remain unchanged. Our
$33 price target is based on our combined FY07 EPS estimate of $2.50 and STX's
historic median forward PE multiple of 13x. The hard disk drive sector is inherently
volatile and subject to market share battles and aggressive price declines. Risks
include an unfavorable supply/demand environment and failure to achieve
competitive time-to-market or time-to-volume.

Investment Thesis
Seagate's results this quarter showed a return to typical seasonality for the HDD industry.
PC units declined, while CE grew. Although ASP declines were higher than our expectations
at the beginning of the quarter, declines were still within reasonable levels, with Seagate's
blended ASP falling 2.6% sequentially. As we expected, management gave conservative
guidance for the June quarter, indicating that the PC business and enterprise markets will be
slightly down. We believe management's guidance is prudent, and reflects the realities of a
weak quarter, the distractions around closing the Maxtor acquisition, and seasonal ASP
declines. Despite conservative guidance the industry is healthy, with supply/demand in
balance and channel inventory in the 4-6 week range.
Notebook market slows, but Seagate bucks seasonality despite a slowdown in the overall notebook business, Seagate saw substantial growth, with PC NB units up 30% this quarter, driven by new products and share gains with OEMs. In addition, Seagate's Xbox units were roughly 5x higher this quarter, with units of 1.5M surpassing units of 300K last quarter. On a combined basis, we believe Seagate's 2.5-inch share (NB and CE) is now more than 20%.
Seagate shares are attractive at current levels, with NT catalyst ahead

We believe the market is valuing Seagate on a standalone basis, despite clear confidence
from Seagate that it expects to close the Maxtor acquisition. Last week in an 8K filing,
Seagate announced the date for the shareholder vote (May 17th ), and indicated it expects to close the acquisition in May. Based on our conservative estimates for the combined
company, we believe STX could earn $2.50 in FY07. At Seagate's median PE of 13x, this
would imply a fair value for the shares in the low $30 range. We believe catalyst to the
shares moving higher are (1) the closing of the STX-MXO deal in mid May, (2) new product
announcements and detail on the merged company to be presented at STX's Analyst Day the
first week of June, and (3) upside to expectations in C2H based on 160GB/platter DT and
PMR-based NB drives which will be fully ramped in the second half.

Guidance and outlook
As we expected, management gave conservative guidance for the June quarter, guiding
revenue slightly lower than the Street (G: $2.1-$2.25B vs. Street at $2.23B), and guiding EPS
lower (G: $0.42-$0.45 vs. Street at $0.49). Management maintained the mid-point of its prior
guidance, but tightened the FY06 EPS range to $2.05-$2.08, from $2.04-$2.09. We have
maintained our F4Q06 revenue estimate of $2.16B, but lowered our EPS estimate to $0.44,
primarily reflecting lower margins and a higher share count. Our revised FY06 estimates are
now $8.84B and EPS of $2.06. Our standalone FY07 EPS estimates remain unchanged at
$2.18, however we believe this number is becoming increasingly irrelevant. On a combined
basis, our conservative estimates for Seagate-Maxtor are $2.50 in FY07. For our standalone
STX model, please see Figure 3 below. For our combined model, please see our 4/12/06
note "March Preview."

Valuation
Since its IPO, Seagate's average FTM P/E has been 15x, with a median P/E of 13x and a one
standard deviation range of 7x-23x. Our $33 price target implies that the combined Seagate-
Maxtor trades at 13x our FY07 EPS estimate of $2.50. On a standalone basis, this implies
Seagate trades at 15x our standalone FY07 EPS estimate of $2.18. Our 13x multiple is in line
with our 13x multiple for Western Digital, as we expect both companies to benefit from the
Seagate-Maxtor merger. Historically HDD stocks have traded together with a P/E range of
roughly 8x-20x. At current levels, we rate Seagate's shares a Buy.

Risks
The hard disk drive sector is inherently volatile and subject to market share battles and
aggressive price declines. While we believe market fundamentals are currently in check, a
decline in overall demand could lead to aggressive tactics by any one of the HDD vendors.
Risks include an unfavorable supply/demand environment and failure to achieve competitive
time-to-market or time-to-volume. Specific risks to Seagate include market share losses as a
result of the announced Maxtor merger, miss-execution in its lines of business, and miss-
execution in ramping its new PMR-based drives.

[la-onda]

EMA50 should hold as support 

nice summary link:
http://www.knobias.com/individual/public/news.htm?eid=3.1.3c584b84f81106865c549c7efadd91aeed2ae2b05a7097848690a45283a83076

updates:

Seagate Tech    STX    Kaufman Bros    Buy                 $28 » $33
Seagate Tech    STX    Needham & Co  Strong Buy    $32 » $34


Michael, your opinion is appreciated!
cheers
Oliver

[Michael]

Hi Oliver,

I was frankly also a bit disappointed about the outlook and I think they are either a bit too conservative or maybe they expect the competition with WDC to heat up the closer we get to the Maxtor take over.

When that is said STX is still a great stock to hold long time. They are still a market leader and are cheaper than their main (albeit smaller) competitors on all key indicators.

I am very encouraged by the phenomenal growth on the consumer equipment side. 3.8 million drives for mobile applications and 2.5 million for DVR. Who would have thought just two years ago that your mobile phone would come with a hard disk? Two years from now I wouldn't be surprised if people couldn't imagine a mobile phone without a Hard Disk Drive. (where am I going to save my vacation videos  )

The HDD sector is still very interesting and very cheap compared to the growth and perspectives. STX might be a bit depressed in the coming days but long term it will do great!

[la-onda]

update:
STX: Short Interest DN 64.2% to 12.1M in Jun 2006
Wednesday, June 21, 2006 17:21 ET

According to new short interest data from NYSE, short interest for Seagate Technology (NYSE: STX) DECREASED 64.2% to 12,116,018 shares for the month ended mid-June, 2006.

SYMBOL               MAY            JUNE          CHANGE       %CHANGE     DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
STX           33,800,239      12,116,018     -21,684,221       -64.15%           2

Based on STX's 20-day average daily share volume of 8,566,220, it would require approximately 2 day(s) of buying to cover this short interest.