You might say

Seagate's

(SEG)

been all over the map.

In its fourth quarter ended in June, the Scotts Valley, Calif.-based disk-drive maker fell short of per-share earnings expectations by a whopping 19 cents. Then, in its first quarter ended in September, Seagate unexpectedly swung to a profit, beating expectations by 16 cents. The latter surprise set off a sharp rally in Seagate shares through year-end, perching the stock at a breathtaking 106 times 2000 earnings estimates as of Monday's close.

Now, with Seagate set to report second-quarter earnings after the close Tuesday, no one knows what kind of numbers to expect from "the only disk-drive maker that isn't dead money," says Patrick Manning, a New York-based money manager who has no position in the stock. But even with the stock priced for perfection, Seagate's penchant for making lucrative investments in all manner of companies outside its core business -- as well as its diversification into software -- should provide a cushion should its numbers disappoint.

Seagate's Shares Surge
But can it convince the Street it's not just a disk-drive stock?

Reporter's Note: Quantum split its two core businesses into two separate stocks: HDD is the stock symbol for its hard disk-drive business; DSS symbolizes its DLT and Storage Systems outfit.

Flying Disk

Ever since its September surprise, which

International Data

analyst Roger Kay attributes to stronger-than-expected growth in the PC industry, Seagate's stock has been on a tear: It jumped 56% between mid-October and year-end, before retreating slightly in the new year. That marked the first sustained run for Seagate since the fall of 1997, when the Asian economy sent disk-drive stocks tumbling with a bad case of the flu.

In sharp contrast with competing disk-drive makers, which have continued to swoon in recent months, "Seagate has a balance sheet to die for," says Randy Befumo, an analyst at

Legg Mason Fund Adviser

whose firm doesn't own any disk-drive stocks. "The company's equity stakes alone plus cash are worth $30 a share." Seagate, which closed Monday at 42 9/16, has reported six consecutive profitable quarters and has $1.2 billion in cash reserves, points out CEO Stephen Luczo.

And some observers say the strategic investments make Seagate appealing along the lines of Internet favorites

CMGI

(CMGI)

and

Internet Capital Group

(ICGE)

, which have become stock-market darlings.

For instance,

Morgan Stanley Dean Witter

analyst Gillian Munson last month upgraded Seagate from neutral to outperform, telling clients that "Seagate's investments are getting very hard to ignore." Morgan is a recent Seagate underwriter.

A full two-thirds of Seagate's value, notes Munson, comes from its investments in such companies as

Veritas

(VRTS) - Get Report

,

SanDisk

(SNDK)

and soon-to-be-public

Dragon Systems

, a voice-recognition software outfit.

Seagate owns 61 million shares of Veritas, or 24% of the enterprise software maker, according to Phil Montero, Seagate's manager of communications. That investment alone is worth $6.9 billion, just shy of Seagate's market cap of $8.3 billion.

Lower Hurdles

Of course, investments alone won't help Seagate's management execute, and the recent earnings inconsistency has some concerned. "The company's high-end disk-drive sales and enterprise business overall have been a little weak," says

Hambrecht & Quist

analyst Bill Lewis. "But with reduced expectations compared to last year, it should meet or slightly exceed expectations," which have the company earning 9 cents a share for the quarter, down sharply from 42 cents a year earlier. Hambrecht & Quist has a market perform on Seagate and hasn't underwritten for it.

Seagate's recent decision to aggressively price "its competition out of business," says Befumo, also could compromise the company's margins this quarter. But Luczo says the company has eased up on some of its aggressive pricing over the past few months, and is now looking for its software division to offset any temporary disk-drive margin weakness. An acquisition -- which now appears more likely since the stock is no longer dormant -- also could be used to boost its low-margin disk-drive business. Luczo says the company isn't interested in any disk-drive-related acquisitions.

Bottom line: Unlike competitors

Western Digital

(WDC) - Get Report

or

Quantum

(DSS) - Get Report

, "even if Seagate runs into problems, it can always sell a little Veritas," says Befumo. Which means it will be that much harder to wipe this stock off the map.