Thursday, 21 July 2011

seagate q4 call notes

I have about three clips of this on, so my read is going to be biased whether I want it to be or not. clip one from when its deal was announced, clip 2 was a slow add on pull backs, and clip 3 was added yesterday as a punt on earnings. stock is down 11% amc, I was wrong and got my fingers burnt, mentally its very tempting to try to go through the call and find reasons that the market was wrong and to look for excuses, going to try to NOT be biased.

seeking alpha have the transcipt of the call, which I find very handy; seekingAlphaLink

$2.9bn revenue for quarter
$0.28 eps non-gaap
tam 166mm
32% market share
- believe june TAM is not inventory build but true demand
margin improved, not as much as they would have historically in this environment
*THAT* is the disappointment. they say because of four factors;
1) agreed pricing with OEM before demand surge
2) 'didn't achieve out time to maturity targets'
3) commodity price rises
4) able to service demand, but in lower margin segments

sold $600mm of senior unsec notes
sep tam think 165-170mm, $2.9bn revenue, see 200bp impact of commodity prices on margins, looking to offset them (but sound skeptical), also say that they'll look to pass them on.
r&d and sga @ $350mm
0.29-0.33 forecast eps

cerium oxide

q&a shows they aren't executing transitions well, and are wasting resources and tech -> not what I or the market expected.

Yes its disappointing, especially as its really execution failure when the market is presenting good opportunities, and if you're and investor like me, that bought the stock because of improving sector dynamics you're probably even more frustrated. It certainly marks down management in my books. What will enrage me is if management still take fat comp.

I messed up adding to the position yesterday. Am glad that I have sensible risk limits and will review whether to add based on price action today.

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