Seagate CFO Sets Sights on Skinny Laptops

NEW YORK (TheStreet) - Seagate (STX) missed Wall Street's estimates in its first-quarter results earlier this week.  Despite that, CFO Pat O'Malley is confident that super-skinny laptops, better known as ultrabooks, will lift the hard drive maker.

Earlier this year, Seagate unveiled a 7-mm thin hybrid drive aimed at the notebook market and a 5-mm thin mobile drive for tablets. O'Malley said that the 7-mm drive, which combines the speed of Solid State technology with the capacity of a hard drive, is gaining traction.

"As each quarter goes on it will take more and more of the traditional business," he said. "I am very comfortable that the 7-millimeter hybrid, a year from now, could be the vast majority of our shipments."

Seagate shipped about 1 million of the 7-millimeter hybrid drives out of a total 55.7 million drives during its fiscal first quarter. O'Malley expects the drive to eventually appear in both business and consumer laptops.

"The first entry is in the commercial notebook, we hope to eventually get it into the consumer notebook, and that's where it becomes a larger portion of our business," he said. "We do believe that over the next year that could penetrate in the consumer notebook."

Seagate's 5-mm drive, however, has its work cut out in a tablet market where Apple (AAPL) has been aggressively pushing its iCloud storage for the iPad. South Korean giant Samsung has thrown its weight behind Flash memory.

Nonetheless, the emerging market for hybrid devices that combine tablet and notebook features could present an opportunity for the Cupertino, Calif.-based Seagate. "We're very hopeful that Original Equipment Manufacturers come up with a value proposition and can find their place in the sun," said O'Malley. "We're watching that develop."

In the meantime, the 5-mm drive looks a good fit for skinny laptops, according to the CFO. "I think that you will see the 5-mm, from now to when we're talking a year from now, probably being in the thin and light notebooks more than it will be in tablets," he said.

Seagate reported a top and bottom-line miss in its fiscal first-quarter results, released earlier this week.

The hard drive specialist reported revenue of $3.5 billion, down from $3.7 billion in the prior year's quarter. Analysts surveyed by Thomson Reuters were looking for sales of $3.56 billion.

Excluding items, Seagate earned $1.29 a share on net income of $473 million, down from $1.45 a share on net income of $594 million in the same period last year, and just below analysts' forecast of $1.30 a share.

However, O'Malley told TheStreet that profits were lifted in last year's quarter thanks to the lingering effects of Thailand's 2011 floods. "That was the last of the quarters where the flood impacted," he said. "There was pricing leverage because there wasn't full supply out there."

After market close on Thursday Seagate announced that it will increase the size of its senior unsecured notes offering to $800 million from $500 million.

Shares of Seagate dipped 0.6% to $48.40 during Friday trading.

--Written by James Rogers in New York.

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