Seagate FY 3Q16 Earnings Call Notes

posted in: Notes | 0

Seagate Technology’s (STX) CEO Steve Luczo on Q3 2016 Results

Generally weak macro environment and shifts of technologies by end users

” We believe Seagate’s March quarter results are reflective of a generally weak macroeconomic environment as well as accelerating usage shifts of technologies and architectures by end users. Our HDD shipments for the March quarter were $39.2 million units and 55.6 Exabyte’s reflecting a seasonally lower than expected overall.”

Particular weakness in client desktop

“We experienced particular weakness in the client desktop as well as the enterprise legacy markets, adding strength in the enterprise cloud markets. Overall average capacity per drive was 1.4 Terabytes up 30% year-over-year and within this near line cloud average capacity per cloud was 3.9 Terabytes up 25% year-over-year.”

Adoption of mobile and clound mean there will be a shift in revenue split for HDD storage

“The continued advancement and adaptation of mobile and cloud based computing architectures is reflected in the revenue shifts we are seeing in our portfolio. Our long term business thesis continues to be that there will be a significant transition in the HDD from a historical split. Revenue split of 60% client and 40% enterprise revenue to 40% client and 60% enterprise revenue over the next several years.”

Client market remaining share dominated by high capacity products

“While overall PC HDD client revenues is declining the remaining share is dominated by high capacity products which will continue to increase with the new product offerings that we have started to introduce in the June quarter. we are starting to see our client business shift to consumer, surveillance, gaming and DVR markets which are all high capacity user environments which I believe over the next several quarters this growth will result in these combined markets being greater than the traditional PC compute market today.”

Dave Mosley

End of life for 500 GB and below products

” In the client space as Steve sad the PC market continued to decline in Q3 and we began end of life activity on some of the older 500 Gigabyte and below products that have very low margins”