Thursday, April 14, 2016

Seagate Misses in Q1, Signs of Enterprise Shift to Cloud

Seagate Technology updated its Q1 guidance, saying it now expects to report revenue of approximately $2.6 billion and non-GAAP gross margin of approximately 23% for the fiscal third quarter 2016. The Company expects to report HDD unit shipments of approximately 39 million, representing approximately 40% market share.

Seagate said its weaker than expected performance was driven "primarily by reduced demand for traditional mission critical HDD enterprise products, reduced demand for the company’s systems and silicon products, reduced demand for desktop client products primarily in China, and the company’s decision to not aggressively participate in the low capacity notebook market." A strong point was better than expected demand for 8TB nearline products, reflecting the company’s belief that an increasing level of enterprise applications are shifting to cloud environments.

“We are disappointed that we did not anticipate the weaker demand in the March quarter. There are many complex issues impacting the traditional go to market channels in our market, which are reducing our forecast visibility. Despite the disruption of the shifts in our traditional mission critical HDD business in the near term, we believe the long term benefit of cloud architectures for end users, and the related need for very high capacity drives, is a net positive for Seagate and the HDD industry," said Steve Luczo, Chairman and Chief Executive Officer.