Drive maker Seagate boosts outlook

Seagate Technology said Tuesday it is lifting the outlook for its current quarter because it is selling more high-end, high-profit hard drives than expected.

The world's largest drive maker forecast earnings for its fiscal third quarter between 63 cents and 67 cents per share, up from an earlier forecast of 57 cents to 61 cents per share, based on generally accepted accounting principles.

Excluding about $27 million in one-time costs, the company forecast earnings of 68 cents to 72 cents per share, also higher than its original forecast of 62 cents to 66 cents per share on that basis.

Seagate still expects total quarterly revenues to fall between $3.2 billion and $3.3 billion, according to a filing with the Securities and Exchange Commission.

Before the revised forecast came out Tuesday, analysts surveyed by Thomson Financial had expected Seagate to earn 63 cents a share in its fiscal third quarter on revenue of $3.25 billion. Analysts typically excluded one-time items from their estimates.

Seagate shares rose $1.09, or 5 percent, to close at $22.91 Tuesday.

Analysts said they were expecting Seagate to take a stronger hit from slowing PC sales.

But Seagate said it made up for that through stronger sales of its larger capacity and higher margin drives. It also said its overall pricing has been slightly more favorable than originally planned.

"It's a little bit of a relief," said Shebly Seyrafi, an analyst with Caris & Company. "This is a good development from Seagate relative to depressed expectations. But there's still some risk ahead related to decelerating PC growth and potential end-of-quarter price aggression by the competition."

The company had said in January its third-quarter forecast was conservative because of recession worries.

Seagate is based in the Cayman Islands and operates out of Scotts Valley, Calif.,

The news follows a strong fiscal second quarter for Seagate, when earnings nearly tripled as shipments rose 20 percent year over year.

For the quarter ended Dec. 28, the company earned $403 million, or 73 cents per share, up 188 percent from $140 million, or 23 cents per share, in the year-earlier quarter.