These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent dates, and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.I would now like to turn the conference over to our host, Mr. Steve Luczo, CEO. Please go ahead. Steve Luczo Thank you, Melanie. Good afternoon, everyone, and thank you for joining us today. On the call with me today are Pat O’Malley, our Chief Financial Officer; Bob Whitmore, our Chief Technology Officer and Head of Research & Development and Manufacturing Operations; and Dave Mosley, Executive Vice President of Sales, Marketing and Product Line Management. As we've done for the past two quarters, detailed supplemental information about the quarter has been posted on our Investor Relations website. In addition, we recently completed a number of studies that represents Seagate's point of view on tablets and mobility, SSDs and flash, cloud computing and the demand for storage over the next decade. In total, there are eight documents that provide an excellent basis for important emerging storage trends. You can find these documents now on Seagate's Investor Relations website on seagate.com. I will review the results for the December quarter, address a few of the questions that we know many of you have, and then we'll open up the call to question and answer. As you may recall, we've reported our second quarter business outlook in November as opposed to providing it with our first quarter results in October. In our outlook for the December quarter, we noted the following: Demand for hard disk drives had improved from the summer early fall; expectations for the total available market was approximately 170 million units; and supply and demand appeared to be well balanced with the company's inventory across all channels at or below targeted levels. As a result, we forecasted at least $2.7 billion in revenue and gross margins as a percent of revenue of at least 19.5%.
While the total available market for the quarter was in line with expectations at approximately 168 million units, disk drive shipments had a greater-than-seasonal slowdown in the last two weeks of the quarter. In particular, Seagate experienced a slowing of demand in the Asia-Pacific distribution channel during the last two weeks of the quarter and elected to reduce shipments and maintain our pricing discipline.Seagate met its revenue and gross margin target of $2.7 billion and 19.5%, respectively, due primarily to a greater-than-expected increase in the average store capacity per drive shipped in all markets. The December quarter results also included the impact of additional customer support costs associated with our long-term supply agreements. The negative impact to gross margin percentage was approximately 170 basis points, and we are confident that the impact is really reflected and contained within the December quarter results. For the December quarter, we also reported non-GAAP diluted earnings per share of $0.33, even with a higher-than-anticipated provision for income tax. With respect to our capital structure, the focus of the board and management continues to be on regularly evaluating ways to optimize the balance sheet in light of current and future capital market conditions and the current and future operating environment. Importantly, Seagate continues to focus on maximizing shareholder returns while maintaining the flexibility for continued investment in a broad range of storage technologies as required by our existing and evolving customers. Pursuant to this plan, the board in November authorized the company to repurchase an additional $2 billion of ordinary shares. In December, we used $305 million to purchase 21 million shares. Also during the quarter, we issued $750 million of senior unsecured notes. The board and management are continuing to evaluate alternatives beyond the stock buyback, including, for example, distribution of a quarterly dividend to increase shareholder value from our company's consistent and significant cash flow. This reflects our long-term confidence in the demand for disk drives in the Internet-based computing environment that is positively impacting both commercial and consumer storage demand. As an example, in the December 2010 quarter, Seagate experienced a 31% increase per drive average capacity shipped year-over-year. We believe this is further evidence of the need for the company's affordable mass storage products for the expanding user base that utilizes media and data-rich content. Read the rest of this transcript for free on seekingalpha.com