Seagate sees component shortages in flash storage market

IT spending looks OK, but component shortages may ding server, cloud service provider, and PC demand for solid state storage.

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Seagate CEO Steve Luczo said he was cautiously optimistic about the economy and technology spending, but noted there are NAND and DRAM shortages that may hamper demand in the server and PC markets.

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The storage giant reported fiscal third quarter earnings of $194 million, or 65 cents a share, on revenue of $2.7 billion. Non-GAAP earnings for the quarter checked in at $1.10 a share.

Wall Street was looking for earnings of $1.07 a share for the third quarter on revenue of $2.71 billion.

Overall, Seagate executives said they were pleased with the quarter, but they were cautious going forward largely due to component shortages in the market. Luczo added on a conference call that Seagate's hard disk drive storage fared well and it's branching out into new markets. For instance, Seagate launched a drive for drones to record up to 60 hours of 4K video footage.

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As for the outlook, Seagate said it expected revenue of $2.5 billion and $2.6 billion for the fiscal fourth quarter. Luczo said:

Our expectations reflect the seasonal decline in revenue, our desire to maintain lower inventories going into the summer months and some conservatism due to the potential impact of component shortages in DRAM and NAND on various aspects of our customers' businesses in the server, CSP (cloud service provider) and client space.

Seagate said it is on target to deliver 2017 earnings of at least $4.50.

Add it up and there's simply a lot of demand for flash memory and a lot of devices out there.

"The NAND companies are constantly optimizing where they ship their NAND. Do they go into phones, does it go to data centers, is it going to the servers or does it go into PCs? And depending on the grade of flash you're building, the capacity plans you put in 6 months ago and then what customers are asking for versus the free optimization where the NAND is flying," said Luczo.