Seagate Technology Shares Soared: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of hard-disk-drive maker Seagate Technology (NAS: STX) are spinning much faster today, up by 24% at the high, after the company reported second-quarter earnings.
So what: Revenue added up to $3.2 billion, leading to earnings per share of $1.32. The company moved 47 million disk drives during the quarter, as the sector is still recovering from the floods in Thailand last year. Seagate just closed its acquisition of Samsung's HDD business during the quarter, and has recognized $5 million in amortization of intangibles this quarter, with another $35 million expected in the third quarter.
Now what: The HDD shortages have helped Seagate boost pricing, while its production wasn't hurt as badly as rival Western Digital (NYS: WDC) . The company said its biggest customers are now trying to lock down supply through long-term contracts. This would represent a big shift in the industry, as computer makers have historically pitted suppliers against one another on pricing. CEO Steve Luczo said such contracts are "new to the disk-drive industry and represent a structural change to the way we do business."
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At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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