Weak retail business in Europe hits Seagate revenue

By Arathy S Nair and Subrat Patnaik (Reuters) - Hard-drive maker Seagate Technology Plc's revenue forecast for the current quarter fell well short of analyst estimates, largely due to weakness in Europe, sending the company's shares down as much as 12 percent. The company, which gets about two-thirds of its revenue from original equipment manufacturers including PC makers, also reported weaker-than-expected revenue for the second quarter. "We are tempered somewhat by the instability of European business environment as well as commodity and currency volatility throughout the world," Chief Executive Steve Luczo said on a conference call with analysts on Monday. Seagate's retail business in Europe, which accounts for about 20 percent of the company's revenue, shrank about 5 percent in the December quarter, Luczo said. The pricing pressure Seagate is experiencing in both its enterprise and retail businesses are stronger than investors had expected, Longbow Research analyst Joseph Wittine said. Research firm IDC estimates that worldwide PC shipments fell 2.4 percent in last quarter of 2014 as consumers shift to smartphones and tablets. To help make up for a declining PC market, Seagate and rival Western Digital Corp are expanding into the growing market for products that help store data in the cloud. Seagate forecast third-quarter revenue of about $3.45 billion, well below analysts' average estimate of $3.59 billion (2.38 billion pounds). Net income attributable to Seagate in the second quarter ended Jan. 2 rose to $933 million, or $2.78 per share, from $428 million, or $1.24 per share, a year earlier. Excluding items, company earned $1.35 per share. Revenue rose to $3.70 billion from $3.53 billion. Analysts on average had expected earnings of $1.35 per share on revenue of $3.74 billion, according to Thomson Reuters I/B/E/S. Seagate's shares were down 9 percent at $58.25 in late morning trading on the Nasdaq, while Western Digital's shares were down 8 percent at $97.63. Wittine said pricing pressures would also weigh on Western Digital, which reports results on Tuesday. Up to Friday's close, Seagate's shares had risen about 18 percent in the last year. Western Digital's shares had risen about 27 percent. (Reporting By Arathy S Nair and Subrat Patnaik in Bengaluru; Editing by Kirti Pandey, Saumyadeb Chakrabarty and Ted Kerr)