Storage specialist Seagate ( STX - Get Report) has met analysts' sales guidance but swung to a $273 million loss in its third-quarter results. Seagate reported third-quarter sales of $2.1 billion, down from $3.1 billion in the same period last year, but just above Wall Street's forecast of $2.01 billion. The revenue figure did not exactly come out of the blue. Seagate recently forecast better-than-expected revenue and gross margin in its preliminary third-quarter results. The Scotts Valley, Calif.-based firm had initially forecast revenue of $1.6 billion to $2 billion, but raised this figure following strong sales of its 2.5-inch and 3.5-inch products. Seagate nonetheless posted a loss of 56 cents a share, and a net loss of $273 million, compared to earnings of 68 cents a share and profit of $344 million in the year-ago quarter. Analysts had forecast a loss of 45 cents a share. The storage firm is in the throes of a major restructuring effort and has recently reworked its credit facility. Charges associated with Seagate's restructuring and acquisitions contributed a loss of $54 million, or approximately 11 cents a share, to the third-quarter results. "I am impressed by the progress we're making in improving our operational performance," said Segate CEO Steve Luczo in a statement released Tuesday. "As a result, assuming a relatively stable business environment, we believe we can improve margins and reach profitability within fiscal year 2010." Seagate, which competes with Fujitsu and Western Digital ( WDC - Get Report), predicts flat demand for disk drives in the fourth quarter.
The company expects revenue to be approximately $1.9 billion to $2.2 billion, and gross margin as a percentage of revenue to improve by 300 to 400 basis points compared to the March quarter. Despite citing lack of visibility into the future, Seagate expects a net loss per share between 37 cents and 47 cents, although this includes 8 cents per share of restructuring charges. At least one analyst warns that it could be some time before Seagate sees a significant uptick in demand for its products. "We expect demand conditions to remain soft, but stable for the foreseeable future," wrote Jayson Noland, an analyst R.W. Baird, in a recent note, downgrading Seagate to Neutral. "We do not expect demand to accelerate into the second half of calendar year 2009."