Seagate Technology Inc. (STX) reported third quarter 2010 earnings per share of $1.02, exceeding the Zacks Consensus Estimate of 93 cents per share.

Revenue

The company reported revenue of $3.05 billion up 41.8% from $2.15 billion reported in the year-ago period. The company registered high growth in shipments, while the inventory levels at the company’s OEM and distribution business remained low across all geographic regions.

Operating Results

Gross margin for the December quarter expanded to 29.6%, up from 7.3% reported in the year-ago quarter. This was 40 basis points higher than the mid point of the guided range, and was supported by the stable pricing environment.

Second quarter GAAP operating income was $560.0 million, a substantial improvement over the operating loss of $262.0 million reported in the year-ago quarter. GAAP operating margin was 18.3% in the third quarter, compared to an operating loss margin of 12.2% reported in the year-ago quarter. The improvement in operating results may be attributed to a substantial reduction in operating expenses, which declined as a result of tight cost control measures implemented by the company.

Second quarter GAAP net income was $518.0 million or $1.00 per share, up from a net loss of $275.0 million or $0.56 per share reported in the year-ago quarter. Excluding purchased intangible amortization expense and restructuring charges of $0.03 per share, adjusted net income was $1.02 per share in the third quarter.

Balance Sheet, Cash Flow & Share Repurchase

Strong cash generation has helped the company build net cash position of approximately $87.0 million. Cash, cash equivalents, restricted cash and short-term investments totaled approximately $2.37 billion at the end of the March quarter, up $177.0 million during the quarter. Cash flow from operations was $577.0 million and capital investment $108.0 million, netting free cash flow of $397.0 million.

Guidance

For the upcoming quarter, the company expects revenue of $2.85 billion to $3.05 billion. R&D and SG&A costs are expected to be approximately $340 million, while unit demand for the June quarter is expected to be down 2.0% to 5.0% sequentially. GAAP earnings per share are expected to be in the range of $0.81 to $0.85 per share, which includes around $0.02 in charges related to intangible amortization expense.
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