Oct 21, 2003

Seagate Technology Reports Fiscal First Quarter 2004 Results

SCOTTS VALLEY, Calif. - Seagate Technology (NYSE: STX) today reported revenue of $1.74 billion, net income of $198 million, and diluted earnings per share of $0.40 for the quarter ended October 3, 2003, compared to revenue of $1.58 billion, net income of $110 million, and diluted earnings per share of $0.24 in the year-ago quarter. This represents a 10% increase in revenue, an 80% increase in net income and a 67% increase in diluted earnings per share from the year-ago quarter.

"One of Seagate's primary strategies is to profitably develop and supply reliable, industry-leading products to every major hard drive market," said Steve Luczo, Seagate chairman and chief executive officer. "The company continued to successfully execute on this strategy, producing strong financial and operational results, achieving significant milestones and seizing growth opportunities despite a dynamic competitive environment.

"During the September quarter we extended our lead in the personal storage market, which includes desktop and consumer electronics applications, and maintained the top position in the enterprise space. We introduced a 100GB/platter drive and a Seagate branded external hard drive for the retail market and are better positioned to supply the growing demand for storage-intensive PC and consumer applications. Momentus, our new notebook drive, has been well received by our OEM customers -- shipping 312,000 units during the September quarter. We recently qualified two new top tier OEMs and we're confident in our ability to meet or exceed our goal of 10% market share as we exit the June 2004 quarter.

"This quarter's performance underscores Seagate's ability to produce excellent operating results in a fast-moving, technically complex and highly competitive hard disc drive marketplace while supporting our long-term focus on sustainable value creation and market leadership."

Financial Review

  • Pricing and Channel Inventory: Price declines for the quarter ended October 3, 2003 were somewhat more competitive than expected. Channel inventory was well-managed and Seagate ended the September quarter with approximately 4.5 weeks of inventory in the channel for personal storage products, which is comparable to the level of channel inventory at the end of the June quarter.
  • Unit Shipments: The company shipped 21.2 million disc drives in the first fiscal quarter, a 27% increase compared to the year-ago quarter and a 34% increase from the June quarter. During the September quarter, Seagate shipped approximately 2.3 million drives for use in consumer electronics applications, compared to 1.2 million in the year-ago quarter.
  • Gross Margin: Gross margin for the first fiscal quarter was 26.9%, compared to 27.6% in the prior quarter. The change in gross margin was impacted by price declines and overall product mix, somewhat offset by improved factory efficiencies and utilization.

Dividend Information

The company has declared a quarterly cash distribution of $0.04 per share to be paid on or before November 21, 2003 to all common shareholders of record as of November 7, 2003.

Conference Call

Seagate Technology will hold a conference call to review the fiscal first quarter 2004 results at 2:00 p.m. Pacific Time today. The live webcast of the conference call can be accessed online at www.seagate.com/newsinfo/invest/. A replay of the call will be available beginning today at 5:00 p.m. Pacific Time through October 28 at 8:59 p.m. Pacific Time. The replay can be accessed from www.seagate.com/newsinfo/invest/ or by telephone as follows:

USA: (800) 642-1687
International: (706) 645-9291
Access code: 2590429

For more information please visit the financial information page.

About Seagate

Seagate is the worldwide leader in the design, manufacturing and marketing of hard disc drives, providing products for a wide range of Enterprise, PC, Notebook and Consumer Electronics applications. The Company is committed to delivering 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.

This release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are made in good faith by the company pursuant to the Safe Harbor Provision of the Act. These forward-looking statements involve known and unknown risks, uncertainties and changes in circumstances, which may cause the company's actual results to differ materially from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond the company's control. In particular, such risks and uncertainties include the variable demand and the aggressive pricing environment for disc drives, particularly in the summer months; the company's and its competitors' ability to introduce, qualify, manufacture in volume and sell new products on a timely and cost-effective basis; competitive factors such as the impact of consolidation within the industry and the potential for excess supply; and the impact on operations or demand, particularly in Asia, of a reoccurrence of SARS. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company's Registration Statement on Form S-1 as filed with the U.S. Securities and Exchange Commission on June 27, 2003. 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.

For further information, contact:

Rod Cooper, Investor Relations
831.439.2371 rod.cooper@seagate.com
Brian Ziel, Media Relations
831.439.5429 brian.ziel@seagate.com

Seagate Technology
920 Disc Drive
Scotts Valley, CA 95066
831-438-6550

Seagate Technology
Condensed Consolidated Statement of Operations

(In millions, except per share amounts)
(Unaudited)

Three Months Ended
 
October 3,
2003
Sept. 27,
2002
Revenue
$
1,740
$
1,579
   
   
Cost of revenue
1,272
1,207
Product development
169
160
Marketing and administrative
78
86
Restructuring costs, net
11
7
 
 
  Total Operating Expenses
$
1,530
 
$
1,460
 
   
Income from operations
$
210
$
119
   
Interest income
4
4
Interest expense
(12)  
(12)  
Other, net
(1)  
2  
 
 
  Other Income (Expense), net
$
(9)
 
$
(6)
 
   
Income before income taxes
$
201
$
113
Provision for income taxes
3
3
 
 
 
Net income
$
198
$
110
 
Net income per share:
 
  Basic
$
0.44
$
0.27
  Diluted
0.40
   
0.24
 
Number of shares used in per share calculations:
 
  Basic
445
   
402
 
  Diluted
499
456
     

Seagate Technology
Condensed Consolidated Balance Sheet
(In millions)
(Unaudited)

October 3,
2003
June 27,
2003 (a)
Assets
   
   
Cash and cash equivalents
$
834
 
$
749
 
  Short-term investments
515
 
445
 
  Accounts receivable, net
708
 
611
 
  Affiliate accounts receivable  
6
   
 
  Inventories
349
 
319
 
  Other current assets
174
 
158
 
 
 
  Total Current Assets
2,586
 
2,282
 
             
Property, equipment and leasehold improvements, net
1,090
 
1,111
 
  Other assets
138
 
124
 
 
 
  Total Assets
$
3,814
 
$
3,517
 
Liabilities and Shareholders' Equity
   
   
  Accounts payable
$
759
 
$
640
 
  Affiliate accounts payable
 
11
 
  Accrued employee compensation
153
 
217
 
  Accrued expenses
345
 
312
 
  Accrued income taxes
180
 
179
 
  Current portion of long-term debt
4
 
4
 
 
 
  Total Current Liabilities
$
1,441
 
$
1,363
 
 
   
   
  Other liabilities
86
 
93
 
  Long-term debt, less current portion
743
 
745
 
 
 
  Total Liabilities
$
2,270
 
$
2,201
 
   
   
  Shareholders' Equity
$
1,544
 
$
1,316
 
 
 
  Total Liabilities and Shareholders' Equity
$
3,814
 
$
3,517
 
 
(a) The information in this column was derived from the Company's audited consolidated balance sheet as of June 27, 2003.