Morgan Stanley Comments On Seagate Technology Following Dividend Declaration, Guidance Raise

Seagate STX declared a quarterly cash dividend of $0.18 per share, which represents a payout of ~$75M per quarter or $300M annualized. Seagate also announced preliminary F3Q11 results. Seagate expects revenue of ~$2.7B, unit shipments of 49M, and gross margins at the high-end of its guidance range of 18-19%. Additionally, Seagate noted that 3.5” inventory in the distribution channel is below the targeted range of 4-6 weeks. Seagate's reinstated dividend is both larger and earlier than expected, likewise F3Q upside was better than expected driven primarily by supply disruption as well as recent industry consolidation. Seagate's $75M quarterly dividend represents a 4.9% yield and compares favorably to the $58M per quarter it paid prior to the recession, demonstrating the company's commitment to returning cash to shareholders and confidence in the industry's long-term outlook. Morgan Stanley has an Equalweight rating on STX. STX closed Thursday at $14.69.