Profit Doubles at Seagate

The company beats EPS estimates while guiding higher.
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Updated from 4:50 p.m. EST

Shares of

Seagate Technology

(STX) - Get Report

were up more than 6% after hours on the strength of a record-setting second quarter and stronger-than-expected guidance for the third quarter.

The company earned a profit of $287 million, or 57 cents a share, on sales of $2.3 billion and shipped 28.8 million hard drives. All three numbers set a record, and the earnings figure, which hit the high end of the company's recently raised guidance, was about double that of last year.

In December, the Scotts Valley, Calif., manufacturer told Wall Street to look for earnings ranging from 53 cents to 57 cents a share, excluding stock-based compensation costs, on $2.2 billion in sales.

Analysts' EPS estimates were way behind, calling for a 52-cents-a-share profit on sales of $2.19 billion.

A year ago, the company earned a profit of $144 million, or 29 cents a share, on revenue of $1.85 billion.

And in an indication that PC sales were strong in the holiday quarter -- despite

Intel's

(INTC) - Get Report

troubles in the quarter -- Seagate said that shipments for use in desktop PCs grew by a strong 16% while shipments of drives for mobile devices soared 136% compared to last year.

Gross margins strengthened a bit in the quarter, improving by 10 basis points sequentially to 25.7%.

In the current, or March quarter, the company expects to show a profit of 55 cents a share excluding items, with revenue of $2.25 billion. Analysts polled by Thomson First Call were projecting a 43-cent-a-share profit on $2.1 billion in revenue.

Seagate also raised its fiscal 2006 outlook, saying it now expects profit of $2.04 to $2.09 per share, or $2.20 to $2.25 excluding stock compensation. Previously, the company had forecast earnings of $1.84 per share, or $2 excluding stock-expensing.

Watkins said that the drive industry as a whole responded to the "enormous proliferation" of digital media by selling an additional 60% of storage during the year.

Last month, Seagate said it would

buy rival drive maker Maxtor

(MXO)

for $1.9 billion in stock. The deal isn't expected to close before the second half of the year and the company expects that the merger will attract scrutiny from regulators.