Seagate Technology Inc. (STX) reported second quarter 2010 earnings per share of 105 cents, exceeding the Zacks Consensus Estimate of 65 cents.
 
Revenue
 
The company reported revenues of $3 billion up 33.3% from the year-ago period and 14% sequentially. The increase in revenue can be attributed to very strong demand for the company’s high end products in both the notebook and desktop markets. In addition, the enterprise market experienced the second consecutive quarter of double digit growth, which positively impacted the company’s business volume.
 
Operating Results
 
Gross margin for the December quarter expanded to 30.5%, an increase of roughly 6 percentage points from the prior quarter and 16.6 percentage points from the year-ago quarter. This substantial increase can be attributed to a stable pricing environment reflecting tight industry supply.
 
Second quarter GAAP operating income was $578 million, a substantial improvement over the $2.47 billion operating loss reported in the year-ago quarter. GAAP operating margin was 19% in the second quarter, compared to an operating loss margin of 29% reported in the year-ago quarter. The improvement in operating results may be attributed to a substantial reduction in operating expenses, from 122.8% to 11.4% in the second quarter and also due to robust revenue growth.
 
Second quarter GAAP net income was $533 million or $1.03 per share, up from a net loss of $2.82 billion or $5.80 per share reported in the year-ago quarter. Excluding purchased intangible amortization expense of 2 cents per share, non-GAAP net income was $1.05 per share in the second quarter.
 
Balance Sheet, Cash Flow & Share Repurchase

Strong cash generation over the last two quarters has helped the company build a net cash position of approximately $200 million. Cash, cash equivalents, restricted cash and short-term investments totaled approximately $2.2 billion at the end of the December quarter, up $418 million during the quarter. Cash flow from operations stood at $753 million for the December quarter, while free cash flow was $650 million. 

Guidance

Given the tight supply position in the industry the company did not provide an outlook for the third quarter and will be providing the same at a later date.

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