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blew past earnings comparisons and estimates in its first quarter as a public company, following a two-year hiatus.

The disk drive vendor, which had its

initial public offering last month, posted a December-quarter profit of 43 cents a share on revenue of $1.7 billion.

The December results reflect a revenue gain of 6% over the same period last year, while profit per share was up 38%.

Analysts had been expecting 24 cents on sales of $1.5 billion.

In after-hours trading, though, reaction was muted: The stock traded down 11 cents or 0.9%. Earlier in the day, it had closed up 40 cents or 3.3% at $12.60.

In a comment likely to be seized on by tech bulls, CEO Stephen Luczo said on the conference call that he's "now seeing more stability, perhaps a slight firming in demand for tech products."

However, Seagate itself guided down for the quarter now underway. "The March quarter is typically seasonally down on units and revenues, and we see nothing that would break out of that seasonal pattern," Luczo said.

For the December quarter, Seagate saw an increase of 10% in its shipments, to 18.3 million disc drives. But unit shipments for March are expected to fall to 16 to 16.5 million units.

Gross margins totaled 28.4%, up from 26.8% a year ago, primarily due to the unit volume increase in the just-ended quarter. But management said margins are likely to hover in the 24% to 26% range going forward. That's because some of the upside it saw in the December quarter came from factors that likely won't be repeated, such as selective price hikes on some of Seagate's personal storage products.

"The opportunity to increase prices on a selective basis certainly gave us a margin benefit in the December quarter, and almost 2 million incremental

sales units gave us a benefit," explained CFO Charles Pope. "If you take that away because of a normal seasonal decline and look at a more normal pricing environment because the channel was being substantially replenished, we anticipate short-term margins will fall."

Meanwhile, the company expects annualized growth in the range of 8% to 10%, based on growth in consumer electronics and its planned entry into notebook computer storage.

"Growth for calendar year 2003 will be somewhat below that since our entry into the notebook will not be material til the middle of '03," cautioned Luczo.

Seagate "definitely had a good quarter," said Mark Miller, an analyst with the boutique investment firm of Hoefer-Arnett, which doesn't do banking. But he called the March guidance "disappointing" and added, "

Luczo doesn't seem to want to answer anybody but his bankers' analysts' questions."

"Our concern with Seagate is over its ability to hold margin share and revenues in the cash cow server market," he said. "

Luzco's argument is he's replacing that with mobile, but they're significantly lower-margin."

With a more optimistic take was Needham analyst Richard Kugele, whose firm has done banking for Seagate. Kugele, who couldn't be reached after the earnings release, said in a note earlier today that he thinks Seagate could wring some healthy revenue growth out of the mobile market. He estimates the company could take as much as 10% to 15% share in laptops by the end of 2003, which might help offset potential share loss in enterprise and desktop segments.

In the research note, Kugele noted that the fourth quarter of 2002 will be the first time in more than two years that disk drive leaders Seagate,




Western Digital

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will all finish in the black. "Overall, we believe the disk drive industry is the healthiest it has been in years," he wrote.

The record downturn in PCs brought about much-needed changes in the industry, prompting consolidation and forcing companies to slash costs and rein in inventories. That's helped to moderate declines in average selling price and, in turn, has made it easier for hard drive vendors to turn a profit.

At current levels, Seagate has risen about 10% from its somewhat disappointing debut on Dec. 11. On its first day of trading, shares closed at $11.50, below the $12 offering price.