Seagate forecasts lower production and sales amid weakening economy
Seagate’s share price is currently in the red zone after its revenue projections for the next quarter fell short of expectations. This is due to the continued economic slowdown that has forced consumers to evaluate their tech spending. As a result, tech companies have had to readjust their strategies to stay ahead.
From its estimates, the number one hard drive maker reckons that its revenue for Q1 of its fiscal 2023 beginning early July and ending early October, will be approximately $2.35 billion. That’s 24% less than year-on-year and notably less than analysts' general consensus for $3 billion.
Seagate also sites potential shortages of necessary manufacturing components as another reason production may dip in the next quarter.
"As we enter fiscal 2023, we expect macro uncertainties and non-HDD component shortages to continue pressuring our end market over the near term," said chief financial officer Gianluca Romano.
According to the CEO, Dave Mosley, they have been feeling the pressure even in the just-ended quarter and although they are optimistic that it’s all temporary there need to be precautionary steps to maintain some discipline and a favourable pricing environment.
"Global inflationary pressures intensified late in the [recent fourth] quarter and while we believe the end market demand disruptions are temporary, we are mindful of prevailing macro uncertainties," he said.
"We are reducing our manufacturing and production plans while continuing to focus on driving efficiencies in the factory and across supply chains. We are maintaining prudent cost controls across the business and executing our product road map which also helps to support our customers' TCO objectives."
Seagate is not the only company to take such measures. Earlier this month, Micron predicted a dip in revenue for its next quarter due to reduced sales of smartphones and PCs.
Other companies like Microsoft are responding by minimising or halting hires across the business.
The new Seagate projections for the new fiscal year come at the tail of a relatively underwhelming fourth quarter that ended July 1st. In the said Q4 revenue fell a little over 13% to $2.628 billion and operating profit dipped to $360 million from $507 million.
Mosley notes that demand for the US data centre has not been affected but the continued shortage of non-HDD components means new data centre build-outs cannot be completed leading to inventory imbalances.
“As macro uncertainties and inflationary pressures intensify, we expect customers will increasingly focus on reducing their inventory levels while maintaining the ability to address end market demand," he said.
The good news is that Seagate’s consumer-facing business only accounts for a fifth of the total sales and, therefore, the company won’t be affected as much by the change in consumer spending patterns.