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Seagate Sales Miss Expectations as PC Slowdown Hits Suppliers

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A pupil uses a laptop computer during a english lesson at the Ridings Federation Winterbourne International Academy in Winterbourne near Bristol on February 26, 2015 in South Gloucestershire, England.Photograph by Matt Cardy—Getty Images

Falling sales of personal computers around the world are starting to impact component makers. Leading disk drive maker Seagate Technology warned on Wednesday night that its sales for the quarter ended April 1 fell short of its original forecast.

That hit Seagate (STX) shares, which were down 9% in premarket trading on Thursday, as well as rival Western Digital (WDC), which dropped 4%. The losses come on top of prior weakness, as investors anticipated some of the slowdown. Before Thursday’s decline, Seagate shares had lost 39% over the past year and Western Digital 53%.

In a warning issued after the market closed last night, Seagate said it brought in $2.6 billion in sales and had an adjusted gross profit margin of approximately 23% for the quarter. The preliminary report of results fell short of what the company had previously said it expected—sales of $2.7 billion and an adjusted margin of 25.6%.

Seagate offered a potpourri of excuses, but the bottom line was that all kinds of PC sales are falling faster than expected. Specifically, Seagate blamed weaker than expected demand for drives used in computers for big companies and lower demand for ordinary desktop hard drives, particularly in China. Seagate said along with lower sales, it also reduced its inventory holdings and might shutter some factories.

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“There are many complex issues impacting the traditional go to market channels in our market, which are reducing our forecast visibility,” CEO Steve Luczo said in a statement.

 

 

“The Company is in the process of prioritizing our strategic positioning, manufacturing footprint and operating expense investments to achieve the appropriate level of normalized earnings. We anticipate that these actions will be implemented over the next several quarters,” he added.

Sales of personal computer declined 11.5% worldwide in the first quarter, according to market tracker IDC. The level of sales, at 64.8 million computers, was the lowest since 2007, according to Gartner, another research firm.

Seagate said it would report full results for the quarter on April 29.