Seagate shares tumble as forecasts miss targets

Seagate Technology shares tumbled down, almost about 18.5 percent on Thursday after the maker of disk drives reported preliminary third-quarter earnings that missed its previous targets, hurt by the global slump in sales of personal computers.

The company late Wednesday said it expects to report fiscal third-quarter revenue of $2.6 billion, compared with its previous forecast for $2.7 billion. Adjusted gross margins will be about 23 percent, lower than previous projections of 25.6 percent, Seagate said.

Cupertino, California-based Seagate blamed the earnings miss on reduced demand for the company’s traditional hard disk drives, silicon and desktop products primarily in China. Its decision not to participate aggressively in the low-capacity notebook market also contributed, the company said.

“We are disappointed that we did not anticipate the weaker demand in the March quarter," Chief Executive Officer Steve Luczo said in the statement. "There are many complex issues impacting the traditional go to market channels in our market, which are reducing our forecast visibility."

Shares of Seagate are now down more than 50% from their 52-week high. With PC sales continuing to slump, declining 11.5% during the first quarter, that portion of Seagate's business is unlikely to recover anytime soon.

Seagate, the third-worst performer on the Nasdaq Composite Index, also dragged down shares of other computer component makers. Western Digital fell 9.1 percent to $40.72. Shares of data storage provider NetAppInc fell 4.6 percent to $25.48.

That’s however not the end of the story. The hard drive certainly isn't going away, particularly in cases where access times are less important than cost. The strength of Seagate's 8 TB nearline drives shows that portions of the hard drive market are thriving, but weakness in other areas is currently overwhelming those positives.