Updated from 4:34 p.m. EDT

Strong sales of hard drives for notebooks and consumer electronics products helped

Seagate Technology

(STX) - Get Report

deliver a bit of upside during the third quarter.

But guidance for the June quarter was somewhat weaker than expected, and in after-hours trading on Instinet shares were off $1.17, or 4.3%, to $26.35.

The Scotts Valley, Calif., storage-product maker earned a profit of $274 million, or 53 cents a share, on revenue of $2.3 billion. Included in the results was an expense of $21 million related to the expensing of stock options and a one-time $7 million gain from an investment.

A year ago, Seagate posted a profit of $229 million, or 45 cents a share, on sales of $1.97 billion.

Analysts polled by Thomson First Call were expecting a 52-cent-a-share profit on sales of $2.25 billion.

Seagate said it shipped 4.7 million drives into the consumer electronics market, an increase of 12% year over year and 38% sequentially. Shipments for digital video recorders were up more than 100% year over year to 2.5 million units.

CEO Bill Watkins said the March quarter was emblematic of a fundamental shift in the storage market. "Change is being driven by the growth of digital content, both for commercial and personal use." Last year's March quarter, he said during a conference call with analysts, had been the best third-quarter in Seagate's history. But strong demand in the just-completed quarter propelled Seagate to a record shipment of 29.4 million hard drives.

Shipments of drives for mobile computing grew to a record 3.8 million, an increase of 112% over last year, the company said.

Looking to the current, or June quarter, Seagate expects to report revenue ranging from $2.1 billion to $2.25 billion; analysts were looking for $2.23 billion. Seagate expects a profit of 46 cents to 49 cents a share excluding option expenses, which would reduce the profit by about $23 million, or 4 cents a share. Wall Street was expecting a 49-cent profit.

The June quarter is the slowest of the year for hard-drive makers, and analysts generally expected Seagate to guide conservatively for the period.

Analyst Shaw Wu of American Technology Research says the expenses for options were a bit heavier than expected, and the guidance was a bit more conservative than expected. "Even so, I don't think the stock is going to get hit too hard in Wednesday's session," he says, noting that after-hours volume tends to be light. Wu has a buy rating on the stock; his company does not have an investment banking business.

Seagate's shares may also have been hurt by the market's surge on Tuesday, which likely encouraged some profit-taking. They closed the regular session up 67 cents, or 2.5%, to $27.52.

Earlier this month,

Maxtor

(MXO)

announced that it will miss its first-quarter financial targets and said it will cut 900 jobs in Singapore. The ugly meltdown, which includes a per-share loss that's more than double analysts' estimates, is the result of slow sales and customer defections brought on by the company's pending acquisition by Seagate, the company said. The deal is expected to close by July, pending shareholder and regulatory approval. A May consummation is still possible, Seagate said.