Profit Slumps at Seagate
Weighed down by the costs of an acquisition and stock options, Seagate Technology’s fourth-quarter profit dropped sharply year over year, while sales grew 16%. The decrease in profit is partly due to them picking up Maxtor and the costs going along with that.
Competitors including Western Digital and Hitachi have been moving aggressively to win customers of Maxtor, acquired earlier this year by Seagate. Even Seagate’s CEO Bill Watkins concedes that Seagate will likely lose about half of Maxtor’s customers. The company reported revenue in the quarter of $2.53 billion, of which $279 million was related to sales of Maxtor products. Net income in the quarter was $7 million, or a penny a share. A year ago, the company reported revenue of $2.18 billion and net income of $280 million, or 55 cents a share. The company said the $1.9 billion acquisition of Maxtor entailed a $146 million accounting charge in the quarter and an operating loss of $72 million. The quarter’s results included about six weeks of combined operations; the acquisition closed May 19. Option expenses put a $17 million dent in the bottom line.
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