Seagate Reports 43% Decline in Hard Drive Sales but Reduces Losses
The hard drive market is facing a situation reminiscent of the memory crisis, as many players ended up with significant stockpiles of finished products post-pandemic and are now cautiously replenishing from manufacturers. Seagate Technology, for instance, experienced a 43% drop in revenue from hard drive sales in the last quarter, amounting to $1.39 billion.
According to the company’s quarterly report, this revenue had consecutively decreased by 14%, with data storage systems and solid-state drives contributing only $218 million in the previous quarter. Approximately 86% of Seagate’s total revenue comes from hard drive sales, so the decline in demand for them immediately affected the company’s performance in the last fiscal quarter of 2023.
Various factors such as uneven economic recovery in different industries in China, significant cloud segment inventory, and corporate clients’ cautiousness about increasing data storage infrastructure expenses contributed to a 39% overall revenue decrease to $1.6 billion in the past quarter. According to Seagate representatives, these negative factors will continue to impact the company’s business until the end of the current calendar year. As the Chinese market reportedly forms up to one-third of Seagate’s revenue, the company’s earnings will depend significantly on its condition.
Seagate shipped approximately 14.2 million hard drives in the last quarter, with an average capacity of 6.4 terabytes, down from 7.8 terabytes a year earlier. The company managed to maintain a 19% gross profit margin by GAAP standards, although it was 28.9% in the previous year. The operating profit margin dropped from 13.7% to 1.6% year-over-year, leading Seagate to incur net losses of $92 million in the last quarter, compared to profits of $433 million just three months earlier.
Seagate derives 73% of its total revenue from the OEM channel, while 14% comes from distributors, and only 13% from the retail channel. Over the entire fiscal year, the company obtained 75% of its revenue from high-capacity mass storage devices, even though this revenue decreased from $7.9 billion to $4.8 billion compared to the previous fiscal year. Capital expenditures in the last quarter decreased by 7% sequentially to $50 million. The company managed to maintain a free cash flow of $168 million and paid $145 million to shareholders in the form of dividends.
Throughout the entire fiscal year, Seagate recorded $7.38 billion in revenue and had free cash reserves of $786 million, paying approximately $990 million to its investors. The revenue decreased by 37% compared to the previous fiscal year, and the GAAP operating profit margin was negative (4.6%). The year ended with net losses of $529 million. In the current quarter, Seagate expects to generate revenue between $1.4 billion to $1.7 billion, a forecast below investor expectations, causing the company’s stock prices to drop by approximately one and a half percent in preliminary trading.
Looking ahead, Seagate plans to mass-produce hard drives with Heat-Assisted Magnetic Recording (HAMR) technology exceeding 30 terabytes by the beginning of next year. Samples of such drives are already being delivered to selected clients. Additionally, the company intends to expand its assortment of Perpendicular Magnetic Recording (PMR) drives beyond the 20-terabyte capacity.
- I'm Vasyl Kolomiiets, a seasoned tech journalist regularly contributing to global publications. Having a profound background in information technologies, I seamlessly blended my technical expertise with my passion for writing, venturing into technology journalism. I've covered a wide range of topics including cutting-edge developments and their impacts on society, contributing to leading tech platforms.
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