Seagate Technology (STX) reported first quarter 2011 earnings of 37 cents a share, falling way short of Zacks Consensus Estimate of 45 cents per share. The company's GAAP reported EPS of 31 cents a share included the impact of non-recurring items.  Earnings were down both sequentially as well as year over year.

Quarterly revenue off $2.7 billion, up 1.3% from the year-earlier level, was in line with the Zacks Consensus revenue estimate.

Seagate failed to report any significant increase in hard disk drives shipments and could only manage a 5.1% increase to 49.2 million sequentially.

Gross profit dropped 15.8% to $550 million year-over-year, while gross margin dropped 4.1 percentage points to 20.4% compared to same quarter prior year. The decrease can be attributable to the 5% increase in cost of revenue to $2.1 billion from prior year quarter.  Operating profit increased 4.5% to $231 million, while operating margin increased 0.3 percentage points on year-over-year basis.

Given the company's recent announcement of interest in going private, they didn't provide any guidance for the coming quarters. The company had announced their interest in going private on October 14, 2010.

Estimates for the quarter had been declining in the run-up to the earnings release, with 8 analysts reducing estimates in the last 30 days. The full-year estimate for next year has been trending down in recent days, with 8 negative revisions in the last thirty days. The current Zacks Consensus Estimate for 2012 of $2.29 is down from $2.38 thirty days ago. The full-year Zacks Consensus Estimate for 2011 also declined to $1.91 from $2.14 thirty days ago.

This is the second quarter in row that Seagate came short of expectations. The company's four-quarter average surprise is a positive 21%. Last quarter they had a 10.3% negative surprise.  Seagate's negative earnings momentum is reflected in the Zacks #5 rank, which translates into a Strong Sell rating, on short term basis.