Seagate slides after sales warning

Seagate’s shares dropped on Thursday after the computer storage maker reduced its quarterly sales outlook amid lower demand for its hard drives.

The Cupertino, California-based group said it expects its revenues to fall 21.9 per cent on a year-on-year basis in the quarter through April 1 to $2.6bn. That came in shy of a previous forecast and Wall Street’s estimates of $2.7bn.

Seagate also said it expects its adjusted gross profit margin to come in at about 23 per cent in the fiscal third quarter, compared with its prior estimate of 25.6 per cent.

The company blamed the dimmer outlook on weaker-than-expected demand for several of its products, including so-called mission critical hard drives that are used by businesses in server applications that require high reliability along with reduced demand for desktop PC products “primarily in China”. It added that it also came partially as a result of its “decision to not aggressively participate in the low capacity notebook market”.

Seagate remains optimistic that in the long term increased demand for hard drives designed to support cloud computing operations will be a boon the group, chief executive Steve Luczo said.

The industry is facing dramatic change as hard drive capacity becomes cheaper and consumers increasingly use mobile devices instead of PCs. Indeed, the 17 per cent year-on-year decline in hard disk drive unit sales in 2015 was the worst going back at least 40 years, Deutsche Bank said in a research note this week.

Seagate’s shares fell 13 per cent to $29.56. The shares of Western Digital, a rival, skidded 6.4 per cent to $42.28.