Seagate Raises Outlook

SAN FRANCISCO -- Hard-disk drive maker Seagate (STX Quote) expects greater sales of its high-end devices to boost first-quarter revenue and profit above its previous estimates.

The company surprised investors Tuesday by setting higher quarterly financial targets after the markets closed.

Excluding one-time charges, the company expects earnings to fall between 62 cents and 66 cents a share, well above its original forecast of 40 cents to 44 cents. Analysts had been expecting 46 cents a share, on average, according to Thomson Financial.

Seagate said that its gross margin should widen to nearly 24%, up from below 20% in the previous quarter, as higher-end devices make up a greater proportion of sales than anticipated.

Shares rose 6.3%, or $1.54, to $26 on the news.

The company has been struggling with falling prices for its goods as rivals Western Digital (WDC Quote), Hitachi (HIT Quote) and Samsung wage a vicious price war.

Prices of hard-disk drives have also come under pressure as consumer electronics manufacturers such as Apple (AAPL Quote) have designed portable devices with smaller, lighter Flash memory units.

Seagate expects revenue of $3.15 billion to $3.25 billion, ahead of prior forecasts and analysts' average estimate of roughly $3 billion.

The news comes amid speculation that a Chinese company or state-owned enterprise is looking to acquire a hard-disk drive maker. The rumor stemmed from comments that Seagate's Chief Executive William Watkins made to The New York Times .