10-QPeriod: Q3 FY2010

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Apr 2, 2010

Filed May 5, 2010For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported a strong recovery in its third quarter of fiscal year 2010, with revenue surging by 42% year-over-year to $3.05 billion, driven by a 31% increase in unit shipments and a broader industry recovery from the global economic downturn. The company achieved net income of $518 million, or $1.00 per diluted share, a significant improvement from the net loss reported in the same period last year. This performance highlights Seagate's ability to capitalize on improving market conditions and manage its operations effectively. The company demonstrated a strengthening balance sheet, with cash and cash equivalents increasing by $635 million to $2.06 billion, primarily fueled by robust operating cash flow of $1.61 billion for the first nine months of the fiscal year. Seagate also actively managed its capital structure by repurchasing $251 million of its common shares and repaying significant portions of its debt. Looking ahead, Seagate is focused on maintaining its market leadership, managing supply chain constraints, and continuing its cost efficiency initiatives.

Key Highlights

  • 1Revenue increased by 42% year-over-year to $3.05 billion for the quarter ended April 2, 2010.
  • 2Net income for the quarter was $518 million, or $1.00 per diluted share, a significant turnaround from a net loss in the prior year period.
  • 3Total unit shipments reached 50.3 million units, up 31% compared to the prior year period.
  • 4Gross margin improved significantly to 29.6% from 7.1% in the prior year period, reflecting better capacity utilization and product mix.
  • 5Cash and cash equivalents increased by $635 million to $2.06 billion, demonstrating strong cash generation from operations.
  • 6The company repurchased $251 million of its common shares during the quarter.
  • 7Seagate reported a decrease in product development and marketing & administrative expenses year-over-year due to cost reduction efforts.

Frequently Asked Questions

The primary driver for the 42% year-over-year revenue increase was the strong recovery in the hard disk drive (HDD) industry following the global economic downturn, coupled with a 31% increase in Seagate's total unit shipments. The company shipped a record 50.3 million units during the quarter.

Seagate experienced a substantial improvement in profitability. The company reported a net income of $518 million and diluted earnings per share of $1.00 for the quarter, a dramatic turnaround from a net loss reported in the same period of the prior fiscal year. This was supported by a significant expansion of gross margin to 29.6%.

Seagate's cash position strengthened considerably, with cash and cash equivalents increasing to $2.06 billion. This increase was driven by strong operating cash flow of $1.61 billion for the first nine months of the fiscal year. The company utilized its cash for strategic initiatives such as repurchasing $251 million of its common shares and investing in capital expenditures, while also repaying debt.

The company repaid $350 million of its credit facility and its $300 million floating rate senior notes matured and were paid. In April 2010, the company announced an offering of $600 million of Senior Notes due 2020. The 6.8% Convertible Senior Notes due April 2010 were also repaid in full. Additionally, the 2.375% Convertible Senior Notes due August 2012 became convertible as of April 3, 2010, and were reclassified as current liabilities.