Seagate Technologies Takes a Dive as Costs Rise

“Seagate is executing well in an environment where consumer demand forecasting is challenging,” commented CEO Steve Luczo in the company’s fiscal 2013 second-quarter financial results. “Looking ahead, we will continue to manage our business conservatively to the demand environment, focus on profitability and effectively invest for market leadership in storage for mobility, cloud and open source.”

Seagate Technologies (NASDAQ:STX) is one of the world’s largest manufacturers of hard-disk drives, and has seen mixed success over the years. The company’s stock is incredibly volatile at a beta of 2.71, and before its most-recent earnings, was trading at all-time highs.

Expectations for the quarter were not that high, and Seagate blew past them. Analysts were looking for earnings of $1.28 per share and revenue of $3.58 billion. The company reported earnings of $1.38 per share and revenue of $3.7 billion. However, Wall Street was still unhappy with the report, and shares dropped as much as 5.1 percent in after-hours trading on Monday.

The killer out of the company’s earnings report is the fact that costs increased faster than revenues. Cost of revenue climbed from 68.4 percent in the second quarter of fiscal 2012 to 73 percent in the second quarter of fiscal 2013.

But despite islands of bad news, the company has still outperformed competitors like Western Digital Corp. (NYSE:WDC) and SanDisk Corp. (NASDAQ:SNDK) — but that doesn’t necessarily mean it will continue to outperform in the future. SanDisk reported strong quarterly earnings last week that won it reiterated “buy” ratings and a lot of positive investor attention. Western Digital has been on a tear the past three months, climbing over 30 percent and also reporting strong quarterly results last week.

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