Analysts trim Seagate, Western Digital expectations

Thu Sep 16, 2010 7:22pm BST

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* Analysts see low total available market for hard drives

* Lower revenue, EPS seen for Seagate and Western Digital

* Shares in Seagate, Western Digital down on Thursday

By Alex Dobuzinskis

LOS ANGELES, Sept 16 (Reuters) - Worsening expectations for PC sales amid slow back-to-school spending have prompted analysts to lower estimates on the industry and on Seagate Technology (STX.O) and Western Digital Corp WDC.N this week.

On Thursday, Caris & Co analyst Robert Cihra became the latest to trim his estimate for hard drive sales this quarter, to 165 million from a previous 170 million.

Shares in Seagate were down 1.8 percent in afternoon trade to $11.18 on the Nasdaq and Western Digital was down 2.1 percent to $26.71 on the New York Stock Exchange.

Hard drive makers endured a poor June quarter as prices fell and No. 3 player Hitachi Global Storage Technologies, a California-based unit of Hitachi Ltd (6501.T), ramped up output in what analysts described as an attempt to gain market share.

In July, both Seagate and Western Digital reported results that were lower than analyst expectations. Since then, Seagate's shares have fallen 23 percent and Western Digital has seen a 11.5 percent decline.

"Back-to-school was sort of soft" and consumers shifted to products such as Apple Inc's (AAPL.O) iPad tablet and smartphones, which do not have hard drives, said Robert W. Baird analyst Jayson Noland.

Cihra lowered his revenue estimate for the quarter for Seagate to $2.72 billion from $2.8 billion, and slashed his earnings per share estimate to 46 cents from 54 cents.

For Western Digital, Cihra lowered his revenue estimate to $2.38 billion from $2.43 billion, and his earnings per share estimate to 81 cents from 87 cents.

J.P. Morgan analyst Mark Moskowitz also trimmed his estimates for the hard drive industry for the current quarter, lowering it to 165.3 million from 169.1 million.

He lowered his revenue estimate for this quarter for Seagate to $2.67 billion from $2.75 billion, and his earning per share estimate to 46 cents from 52 cents.

For Western Digital, he lowered his revenue estimate slightly to $2.33 billion from $2.35 billion, and his earning per share estimate to 76 cents from 80 cents.

Analysts on average are expecting Seagate to post earnings per share this quarter of 48 cents, with StarMine SmartEstimates -- which lends more weight to the most recent revisions from historically most accurate analysts -- of 44 cents.

They expect earnings per share for Western Digital of 83 cents, with a StarMine SmartEstimate of 79 cents.

Noland downgraded Western Digital to a neutral rating from outperform, based on weak consumer spending on personal computers.

But he maintained his firm's outperform rating for Seagate, the hard drive industry's No. 1 manufacturer by revenue, based on that company's "strength in enterprise storage" relative to its competitors, such as No. 2 Western Digital.

Going into this current quarter, Seagate estimated the total available market would be 165 million to 175 million units, and Western Digital gave an outlook of 160 million to 165 million. (Reporting by Alex Dobuzinskis: Editing by Phil Berlowitz)

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