Seagate Posts Strong Second Quarter, Down on Weak Guidance

Seagate Technology

posted better-than-expected results for the second fiscal quarter, topping analysts' expectations by eight percent. The Dublin, Ireland tech firm reports a quarterly EPS of $1.38. Analysts expected the company to come in at $1.28. For the quarter, Seagate reports shipping 58 million units. Revenues were approximately $3.7 billion.

The company sees third quarter sales at $3.25 to $3.45 billion. Even at the high end, this figure is lower than the analyst consensus of $3.48 billion.

Bank of America has reiterated its Neutral position on the Irish firm. Deutsche Bank and BMO Capital have maintained their ratings, as well, at Hold and Market Perform, respectively. Meanwhile, Seagate has taken a dive on multiple fronts. Evercore Partners has downgraded the firm to from Overweight to Equal-weight. FBN Securities has also downgraded Seagate from Outperform to Sector Perform.

Greenlight Capital hedge fund manager David Einhorn lightened his load of Seagate stock as of his latest filing on September 30, 2012. The stock dropped afterward for a while, hovering in the mid-to-high $20s for the remainder of the year after briefly hovering in the low $30s. However, Seagate bounced back this month, gradually climbing into the high $30s before dropping below $35 on Tuesday. Whether Einhorn made the right move or not will depend on how low Seagate dips, as it is still above the closing price on most days during the period he dumped some of it.

Seagate has joined forces with Virident Systems to “Jointly deliver solutions for the growing enterprise flash storage market.” Under the deal, Seagate will offer a complete line of flash-based PCIe products to its OEM and distribution partners. Also, according to the company, “Seagate and Virident intend to leverage their mutual strengths to create next-generation hardware and software solutions for the solid-state storage market.” Additionally, Seagate has made a strategic investment in Virident and will appoint a member to the Milpitas, California firm's board of directors.

With a strong second quarter, the knee-jerk expectation would be for the stock to surge in trading. Throw in the deal with Virident and the company appears to have a slam dunk case for success on Tuesday. However, investors haven't taken kindly to the Dublin firm thus far. The strong earnings and deal with Virident have had little impact in the market. The weak earnings guidance and downgrades, however, have turned the firm into a punching bag of choice. At a little over $34, the stock is at its lowest point since mid-January. As of this writing, it is down nearly nine percent.