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Seagate Technology Reports Fiscal FourthQuarter And Year-End 2006 Results

  • 09 August, 2006 11:04

<p>- Record fiscal year generates revenue increase of 22% to $9.2 billion, net income expansion
of 19% to $840 million and growth in shipments to 119 million units
- Seagate standalone pro forma fiscal fourth-quarter non-GAAP net income
of $241 million in line with outlook
- Fiscal 2007 outlook reflects strong year-over-year growth</p>
<p>– Seagate Technology (NYSE: STX) today reported financial results for its fiscal fourth quarter and full year 2006, which includes both accounting charges related to the Maxtor acquisition of $146 million and a loss from Maxtor’s operating results of approximately $72 million. The acquisition of Maxtor was completed on May 19, 2006, and the financial results announced today include the results of Maxtor operations from May 19 through June 30, 2006.</p>
<p>For the fiscal fourth quarter, Seagate reported revenue of $2.53 billion – of which $279 million was Maxtor product based – GAAP net income of $7 million, and diluted earnings per share of $0.01 for the quarter ended June 30, 2006. On a pro-forma Seagate standalone basis, excluding accounting charges, costs and tax effects directly related to the Maxtor acquisition of $146 million, Seagate’s non-cash stock-based compensation of $17 million and the $72 million loss from Maxtor operations, non-GAAP net income was $241 million for the quarter ended June 30, 2006.</p>
<p>In the year-ago quarter, Seagate reported revenue of $2.18 billion, GAAP net income of $280 million and diluted earnings per share of $0.55. The year-ago results did not reflect costs associated with non-cash stock based compensation.</p>
<p>For the fiscal year ended June 30, 2006, Seagate reported revenue of $9.2 billion – of which $279 million was from Maxtor based products – GAAP net income of $840 million and diluted earnings per share of $1.60. These full year results include accounting charges, other costs and related tax effects directly associated with the Maxtor acquisition of $146 million, $74 million for Seagate’s non-cash stock based compensation, and $5 million of other non-operating charges. Non-GAAP net income and diluted earnings per share, excluding these charges and costs and the associated tax impact, would be $1.06 billion and $2.03.</p>
<p>For fiscal year ended July 1, 2005, Seagate reported revenue of $7.55 billion, GAAP net income of $707 million and diluted earnings per share of $1.41.</p>
<p>“Fiscal 2006 was an exceptional year for Seagate. Our ongoing product leadership and highly-efficient operational execution allowed us to capitalize on the increased demand across all markets and drive substantial growth,” said Bill Watkins, Seagate chief executive officer.
“We achieved many milestones during the year, including transitioning to perpendicular recording, and delivering 10 new products. This quarter in particular was transitional as we closed the Maxtor acquisition and accelerated the integration activities that are bringing us closer to achieving the earnings model that will allow us to maximize value for our shareholders. Charges in connection with the acquisition included the result of under-utilized manufacturing capacity during the ramp down of Maxtor products and the corresponding ramp up of Seagate products, unearned compensation and other integration expenses. Our consistent year-over-year growth in revenue and profitability is a testament to our solid execution in an industry that is critical to a world increasingly reliant on mass storage.”</p>
<p>More detailed information about Seagate and Maxtor unit shipments by market, and supplemental financial information relating to the acquisition of Maxtor can be found online at http://www.seagate.com/newsinfo/invest .</p>
<p>Pricing
The average selling price for Seagate designed products, on a blended basis, decreased approximately $1.00 from the March quarter. In aggregate, price decreases on a “like for like” product basis during the June quarter for Seagate designed products was approximately 7%, which was at the high end of the normal range for price erosion and slightly higher than the company’s expectations at the beginning of the quarter, especially for the desktop markets.
Business Outlook
For fiscal year 2007, excluding accounting charges and other costs associated with the Maxtor acquisition but including Maxtor’s operations, Seagate expects financial results of $11.8-12.3 billion in revenue and $1.90-2.00 for Non-GAAP diluted earnings per share. Including approximately $200 million of expected acquisition related costs, GAAP diluted earnings per share would be $1.58-$1.68.</p>
<p>For the September quarter, Seagate expects to report revenue of $2.65-2.80 billion, and diluted earnings per share of $0.16-0.20, excluding accounting charges and other costs associated with the Maxtor acquisition but including Maxtor’s operations. Including approximately $75 million of expected acquisition related costs, GAAP diluted earnings per share would be $0.04-0.08.</p>
<p>Dividend and Stock Repurchase
The company has declared a quarterly cash distribution of $0.08 per share to be paid on or before September 1, 2006 to all common shareholders of record as of August 18, 2006.</p>
<p>During the quarter ended June 30, 2006, the company repurchased approximately 16.7 million common shares worth approximately $400 million. Also today the company announced its board of directors has approved an additional share repurchase of up to $2.5 billion of the company’s common shares over the next two years.</p>
<p>Conference Call
Seagate will hold a conference call to review the fiscal second quarter results at 2:00 p.m. Pacific Time today. The conference call can be accessed online at seagate.com or by phone as follows:</p>
<p>USA &amp; Canada: (877) 223-6202
International: (706) 679-3742</p>
<p>Replay
A replay will be available beginning August 8 at 5 p.m. Pacific Time through August 15 at 8:59 p.m. Pacific Time. The replay can be accessed from www.seagate.com/newsinfo/invest or by phone as follows:</p>
<p>USA: (800) 642-1687
International: (706) 645-9291
Conference ID: 2505938</p>
<p>For more information please visit: http://www.seagate.com/newsinfo/invest/financial_info</p>
<p>A podcast featuring Bill Watkins discussing Seagate’s performance during the year and the outlook going forward can be heard and downloaded from http://www.podtech.net/seagate beginning at 2:00 p.m. Pacific Time.</p>
<p>About Seagate
Seagate is the worldwide leader in the design, manufacture and marketing of hard disc drives, providing products for a wide-range of Enterprise, Desktop, Mobile Computing, and Consumer Electronics applications. Seagate's business model leverages technology leadership and world-class manufacturing to deliver industry-leading innovation and quality to its global customers, and to be the low cost producer in all markets in which it participates. The company is committed to providing award-winning products, customer support and reliability to meet the world's growing demand for information storage. Seagate can be found around the globe and at www.seagate.com.</p>
<p>Safe Harbor
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements related to the company’s future financial performance, including expected revenue and earnings and estimated restructuring, integration and retention expenses resulting from the acquisition and integration of Maxtor, the timeline for the integration of the former Maxtor operations into Seagate, price and product competition, customer demand for our products, and general market conditions. These forward-looking statements are based on information available to Seagate as of the date of this press release. Current expectations, forecasts and assumptions involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond the company's control. In particular, such risks and uncertainties include Seagate’s ability to integrate the Maxtor acquisition into its operations successfully and on a timely basis; the impact of the acquisition of Maxtor on the company’s financial results, including without limitation due to charges associated with restructuring, purchase accounting and other related transaction costs, and due to shifting of customer demand to the company's competitors or aggressive competitive pricing specially targeted to encourage such shifting; the impact of the variable demand and the aggressive pricing environment for disc drives, particularly in the near term as that may be impacted by delays in new operating system software and new gaming platform hardware systems; dependence on the company’s ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality its current and new disc drive products, particularly in the near term as the company transitions Maxtor demand to Seagate product offerings; the adverse impact of competitive product announcements and possible excess industry supply with respect to particular disc drive products; and the possibility that the combination of Seagate and Maxtor will not provide the anticipated benefits to the combined company on the projected timeline, if at all. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company's Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission on August 1, 2005; in the company’s Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on April 28, 2006; and in the company’s Form 8-K, as originally filed with the U.S. Securities and Exchange Commission on June 1, 2006. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.</p>
<p>Submitted on behalf of Seagate by Einsteinz Communications. For further editorial information please contact Pru Quinlan on (02) 9965 7227</p>

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