SCOTTS VALLEY, Calif. - January 17, 2008 -  Seagate Technology (NYSE: STX) today reported disc drive unit shipments of approximately 50 million, revenue of $3.4 billion, GAAP net income of $403 million, and diluted net income per share of $0.73 for the quarter ended December 28, 2007. GAAP net income and diluted net income per share includes approximately $31 million of purchased intangibles amortization and other charges associated with the Maxtor, EVault and MetaLINCS acquisitions and also a net gain from asset sales of approximately $15 million. Excluding these items, non-GAAP net income and diluted net income per share were $419 million and $0.76. Included in both GAAP and non-GAAP results are restructuring charges of approximately $27 million or approximately $0.05 per share.

For the six months ended December 28, 2007 Seagate reported revenue of $6.7 billion, GAAP net income of $758 million, and diluted net income per share of $1.37. GAAP net income and diluted net income per share includes approximately $61 million of purchased intangibles amortization and other charges associated with the Maxtor, EVault and MetaLINCS acquisitions and also a net gain from asset sales of approximately $15 million. Excluding these items, non-GAAP net income and diluted net income per share were $804 million and $1.45. Included in both GAAP and non-GAAP results are restructuring charges of approximately $32 million or approximately $0.06 per share.

“Seagate’s strong financial performance in the quarter reflects the company’s solid business model and expanded product portfolio, which positioned us well in a favorable industry environment characterized by seasonal strength across all storage markets and continued growth in global demand,” said Bill Watkins, Seagate chief executive officer. “During the quarter, Seagate achieved record shipments and experienced some capacity constraints, underscoring the phenomenal growth of digital content in both the consumer and commercial markets. Based on unit demand across all categories, we entered the March quarter in a position of strength. The storage industry remains one of the world’s most important and exciting industries. We are confident Seagate’s vision, technology, and operational excellence will drive us to continued strong financial and operating performance in the March quarter and double-digit year-over-year growth.”

Adjustments made to GAAP net income and diluted net income per share can be found following the financial statements included with this press release. Additional information relating to the financial results for the second fiscal quarter of 2008 can be found online at seagate.com.

Business Outlook
For the March quarter, Seagate expects to report revenue of $3.2 - $3.3 billion, and GAAP diluted net income per share of $0.57 - $0.61.  Excluding approximately $27 million of purchased intangibles amortization and other charges associated with past closed acquisitions, including MetaLINCS, non-GAAP diluted net income per share for the March quarter is expected to fall within the range of $0.62 - $0.66. At the mid-point, this guidance represents a 15% revenue increase year-over-year and a 36% non-GAAP diluted earnings per share increase year-over-year.

This guidance does not include the impact of any future acquisitions, stock repurchases or restructuring activities the company may undertake.

Dividend and Stock Repurchase
The company has declared a quarterly dividend of $0.10 per share to be paid on or before February 15, 2008 to all common shareholders of record as of February 1, 2008.

During the quarter ended December 28, 2007, the company repurchased approximately 9.3 million of its common shares related to its share repurchase plan. The average price of the shares delivered to the company in the December quarter was $27.00. The company has authorization to purchase approximately $474 million of additional shares under the current stock repurchase program and the company anticipates utilizing the remaining authorization within the March quarter.

Conference Call

Seagate will hold a conference call to review the fiscal second quarter results at 2:30 p.m. Pacific Time today. The conference call can be accessed online at seagate.com or by phone as follows:

USA: (877) 223-6202
International: (706) 679-3742
Conference ID: 28131131

Replay
A replay will be available beginning today at 6:30 p.m. Pacific Time through January 24 at 8:59 p.m. Pacific Time. The replay can be accessed from seagate.com or by phone as follows:

USA: (800) 642-1687
International: (706) 645-9291
Conference ID: 28131131

About Seagate
Seagate is the worldwide leader in the design, manufacture and marketing of hard disc drives, providing products for a wide-range of applications, including Enterprise, Desktop, Mobile Computing, Consumer Electronics and Branded Solutions. Seagate's business model leverages technology leadership and world-class manufacturing to deliver industry-leading innovation and quality to its global customers, and to be the low cost producer in all markets in which it participates. The company is committed to providing award-winning products, customer support and reliability to meet the world's growing demand for information storage. Seagate can be found around the globe and at www.seagate.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements related to the company’s future operating and financial performance, including expected revenue, net income and diluted earnings per share (presented on a GAAP basis as well as on a non-GAAP adjusted basis), price and product competition, customer demand for our products, and general market conditions. These forward-looking statements are based on information available to Seagate as of the date of this press release. Current expectations, forecasts and assumptions involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties, and other factors may be beyond the company's control. In particular, such risks and uncertainties include the impact of the variable demand and the aggressive pricing environment for disc drives; dependence on Seagate’s ability to successfully qualify, manufacture and sell its disc drive products in increasing volumes on a cost-effective basis and with acceptable quality, particularly the new disc drive products with lower cost structures; the impact of competitive product announcements and possible excess industry supply with respect to particular disc drive products; and market conditions and alternative cash and imperatives which could impact our ability to repurchase our stock.  Information concerning risk, uncertainties and other factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company's Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission on August 27, 2007 and in the company's Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on October 29, 2007 which statements are incorporated into this press release by reference. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

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Seagate Technology Condensed Consolidated Balance Sheets
(In millions) (Unaudited)
					December 28, 2007				June 29, 2007(a)
Assets
		Cash and cash equivalents		$	1,433			$	988
		Short-term investments			317				156
		Accounts receivable, net			1,593				1,383
		Inventories			830				794
		Deferred income taxes			215				196
		Other current assets			469				284
			Total Current Assets		4,857				3,801
		Property, equipment and leasehold improvements, net			2,267				2,278
		Goodwill			2,385				2,300
		Other intangible assets			157				188
		Deferred income taxes			674				574
		Other assets, net			276				331
			Total Assets	$	10,616			$	9,472
Liabilities and Shareholders' Equity
		Accounts payable		$	1,776			$	1,301
		Accrued employee compensation			297				157
		Accrued expenses, other			782				786
		Accrued income taxes			2				75
		Current portion of long-term debt			330				330
			Total Current Liabilities		3,187				2,649
		Other non-current liabilities			381				353
		Long-term accrued income taxes			232
		Long-term debt, less current portion			1,734				1,733
			Total Liabilities		5,534				4,735
		Shareholders' Equity			5,082				4,737
			Total Liabilities and Shareholders' Equity	$	10,616			$	9,472
	(a)	The information in this column was derived from the Company’s audited consolidated balance sheet as of June 29, 2007.

 

Seagate Technology Condensed Consolidated Statements of Operations
(In millions, except per share data) (Unaudited)
							For the Three Months Ended							For the Six Months Ended
							December 28, 2007			December 29, 2006				December 28, 2007			December 29, 2006
Revenue							$	3,420		$	2,996			$	6,705		$	5,788
Cost of revenue								2,531			2,450				5,008			4,800
Product development								262			226				504			470
Marketing and administrative								167			141				319			320
Amortization of intangibles								13			12				27			23
Restructuring and other, net								27			1				32			(3)
	Total operating expenses							3,000			2,830				5,890			5,610
Income from operations								420			166				815			178
Interest income								19			25				35			44
Interest expense								(34)			(55)				(66)			(74)
Other, net								18			9				14			11
	Other income (expense), net							3			(21)				(17)			(19)
Income before income taxes								423			145				798			159
Provision for income taxes								20			5				40
Net income							$	403		$	140			$	758		$	159
Net income per share:
	Basic						$	0.77		$	0.25			$	1.43		$	0.28
	Diluted							0.73			0.23				1.37			0.27
Number of shares used in per share calculations:
	Basic							526			571				529			573
	Diluted							556			598				558			600

 

Seagate Technology Condensed Consolidated Statements of Cash Flows
(In millions) (Unaudited)
				For the Six Months Ended
				December 28 , 2007				December 29 , 2006
Operating Activities
Net income				$	758			$	159
Adjustments to reconcile net income to net cash from operating activities:
	Depreciation and amortization				420				414
	Stock-based compensation				58				69
	Allowance for doubtful accounts receivable				(4)				42
	Redemption charges on 8% Senior Notes due 2009								19
	In-process research and development				4
	Other non-cash operating activities, net				3				1
	Changes in operating assets and liabilities:
		Current assets and liabilities			120				(431)
		Non-current assets and liabilities			119				28
			Net cash provided by operating activities		1,478				301
Investing Activities
Acquisition of property, equipment and leasehold improvements					(362)				(466)
Proceeds from sale of fixed assets					24				28
Purchases of short-term investments					(383)				(322)
Maturities and sales of short-term investments					222				687
Acquisitions, net of cash acquired					(78)
Other investing activities, net					17				(29)
	Net cash used in investing activities				(560)				(102)
Financing Activities
Net proceeds from issuance of long-term debt									1,477
Repayment of long-term debt									(400)
Redemption premium on 8% Senior Notes due 2009									(16)
Proceeds from exercise of employee stock options and employee stock purchase plan					132				104
Dividends to shareholders					(107)				(104)
Repurchases of common shares					(500)				(1,075)
Other financing activities, net					2				1
	Net cash used in financing activities				(473)				(13)
	Increase in cash and cash equivalents				445				186
Cash and cash equivalents at the beginning of the period					988				910
Cash and cash equivalents at the end of the period				$	1,433			$	1,096

Use of non-GAAP financial information

Our results of operations have undergone significant change in the past few years, most significantly in connection with our acquisition of Maxtor. To help the readers of our condensed consolidated financial statements prepared on a GAAP basis better understand our past financial performance and our expectations of our future results, we supplementally disclose, after making certain non-GAAP adjustments, non-GAAP net income and non-GAAP diluted net income per share. We also provide forecasts of these non-GAAP financial measures. A reconciliation of the adjustments to GAAP net income and diluted net income per share for the quarter and year-to-date periods are presented in the tables below. In addition, an explanation of the ways in which our board of directors and management use these non-GAAP financial measures to evaluate the business, the substance behind our management’s decision to use these non-GAAP financial measures, the material limitations associated with the use of these non-GAAP financial measures, the manner in which Seagate management compensates for those limitations, and the substantive reasons why we believe that these non-GAAP financial measures provide useful information to investors is included under the caption “Use of Non-GAAP Financial Measures” in the Form 8-K furnished today with the U.S. Securities and Exchange Commission. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with GAAP. You should not compare our non-GAAP net income or non-GAAP diluted net income per share results with those of other companies, as the adjustments made to our GAAP results are unique to Seagate.

Seagate Technology Adjustments to GAAP Net Income and Diluted Net Income Per Share
(In millions, except per share data) (Unaudited)
							Three Months Ended December 28, 2007				Six Months Ended December 28, 2007
	GAAP net income						$	403			$	758
	Non-GAAP adjustments:
		Acquisition related adjustments:
			- Amortization of purchased intangible assets		A			24				48
			- Write-off of in-process research and development		B			4				4
			- Stock-based compensation		C			3				9
			- Gain on the sale of certain assets		D			(15)				(15)
		Adjustments for taxes			E
	Non-GAAP net income							419				804
	Diluted net income per share:
	GAAP						$	0.73			$	1.37
	Non-GAAP						$	0.76			$	1.45
	Shares used in diluted net income per share calculation:							556				558
A		For the three months and six months ended December 28, 2007, amortization of purchased intangible assets acquired in acquisitions was allocated as follows:
							Three Months Ended December 28, 2007				Six Months Ended December 28, 2007
	Cost of revenue						$	11			$	22
	Amortization of intangibles							13				26
		Total amortization of purchased intangible assets					$	24			$	48
B		To exclude the write-off of in-process research and development related to the MetaLINCS acquisition (allocated to Product development)
C		For the three months and six months ended December 28, 2007, stock-based compensation expense related to the Maxtor acquisition was allocated as follows:
							Three Months Ended December 28, 2007				Six Months Ended December 28, 2007
	Cost of revenue						$				$	1
	Product development							2				5
	Marketing and administrative							1				3
		Total stock-based compensation expense					$	3			$	9
D		To exclude the gain on the sale of certain assets (allocated to Other income, net)
E		To exclude the tax effects, where applicable, of adjustments to GAAP net income