Why Seagate Technology Plunged

Editor's note: A Foolish reader points out that Western Digital CEO's pricing comments deserve additional context and relate to long-term agreements; that context has been provided in the comments section following this article. However, we note that Seagate's plunge still appears related to pricing concerns. Please see Anders Bylund's take for a deeper read into Western Digital's earnings.

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 Seagate Technology (NYS: STX) have plunged today by as much as 10% after chief rival Western Digital reported earnings that included a cautious outlook on the sector.

So what: Western Digital said it has recovered from the Thailand floods that crippled it last year, which had subsequently led to hard drive shortages throughout the industry. As the supply continues to recover, there could be some downward pressure on prices throughout the industry, which could also hurt Seagate.

Now what: Someone's story doesn't add up, though. Western Digital CEO said that "prices are lower in the June quarter than they were in the March quarter," while Seagate CEO Stephen Luczo had called pricing "fairly stable" just last week when it reported earnings. It didn't help much that Craig-Hallum downgraded Seagate from buy to hold this morning also.

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At the time thisarticle was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Western Digital. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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