Shares of disk-drive maker
plummeted almost 20% Thursday as investors responded to the firm's
Seagate lost $496 million, or $1.02 a share, compared to profit of $403 million, or 73 cents a share, in the same period last year as the firm felt the
of the economic slowdown.
The storage company's second-quarter revenue also slumped to $2.27 billion from $3.42 billion a year earlier.
As a result, Seagate's shares outpaced the broader retreat in tech stocks Thursday, plunging 79 cents, or 18.63% to $3.46, surpassing the firm's 52-week low of $3.67.
"We are currently experiencing one of the most dramatic economic downturns of our generation," said Stephen Luczo, the Seagate CEO, during a conference call late Wednesday. "Macroeconomic trends are worse than what anyone expected even just a few months ago."
Companies of all sizes are slowing their storage spending, according to Luczo, who warned that the first shoots of economic regrowth may not appear until the first half of 2010.
Against this turbulent backdrop, Seagate also cut its quarterly dividend and predicted weaker-than-expected revenue for the current quarter.
Inevitably, Seagate's stock will continue to feel the strain, according to Jayson Noland, an analyst at
Seagate shares will be quite volatile for the next quarter or two, and we don't feel confident enough in the current environment to attempt to pick a bottom," he wrote in a note released Thursday.
Noland maintained his "neutral" rating on Seagate following the company's lower-than-consensus results and the risk of a "terrible" March quarter, which could see the hard disk-drive market contract by as much as 11%.
Goldman Sachs analyst David Bailey also warned that the coming months will be tough for Seagate.
"With end demand weakening further in the seasonally soft first half of the year and pricing still extremely aggressive, we expect Seagate to continue to see operating losses in the March and June quarters," he wrote, in a note released Thursday.
Bailey explained that he would need to see more signs of stable demand from end users before recommending the company's stock. The analyst also lowered his Seagate EPS estimate fiscal years 2009, 2010 and 2011.
Seagate, which faces stiff competition from
, is also undergoing a major restructuring in an attempt to shave more than $300 million a year off its annual costs.
The Scotts Valley, Calif.-based firm recently swapped out its CEO Bill Watkins for Luczo and announced a slew of
in an attempt to get its business
"We understand that the issues we are facing today are not solely the result of macroeconomic pressures," explained Luczo, during Wednesday's earnings call. "I believe we have the right resources in place, but that we haven't executed at the level that we are capable of."
Seagate's new CEO explained that Seagate will now focus on exploiting its core disk-drive business and adjust its production levels to meet shrinking market demand. Luczo also promised "smarter and faster" decision making from the company.