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Seagate Beats Estimates Despite Decline in Earnings

Earnings fell to $46 million, or 20 cents a diluted share, a 60% drop from the first quarter of 1999.

Seagate Technology

(SEG)

, the leading computer disk drive manufacturer, reported a sharp decline in first-quarter operating earnings Wednesday, but the results sharply exceeded Wall Street's forecasts.

The company, which is moving to go private in a complex, $20 billion transaction with

Veritas Software

(VRTS) - Get Report

, said its pro forma earnings, excluding one-time items, fell to $46 million, or 20 cents a diluted share, a 60% drop from 49 cents a share in the first quarter of 1999.

A survey of analysts by

First Call/Thomson Financial

had forecast earnings of 15 cents a share for the latest quarter.

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Special items for the company during the quarter included: a $49 million restructuring charge, a $105 million in-process research and development write-off related to the acquisition of

XIOtech

, a $453 million gain on the sale of its investment in

SanDisk

(SNDK)

and a $78 million in charges related to the company's investment in Veritas.

Including those items, Seagate reported net income of $136 million, or 58 cents a diluted share, compared with $82 million, or 34 cents a share, in the first quarter of 1999.

Revenue for the first quarter fell 11%, to $1.57 billion, from $1.81 billion a year earlier.

The deal was announced after the stock market closed. Earlier, Seagate's shares ended regular trading down 2, or 3.9%, at 49 3/4.

The earnings report will likely be the second to last for the Palo Alto, Calif.-based company, which expects to complete a transaction in the third quarter that will take Seagate private.

In late March, the company announced a complex transaction in which it will sell its 33% stake in Veritas, a data storage software company, and become privately-held. Under the deal, Veritas will acquire Seagate and Seagate's 33% stake in Veritas, then sell the disk drive business to private investors for $2 billion. The investors include current Seagate management.