Seagate reaps benefit of shake-up

US disk drive manufacturer Seagate Technologies has exceeded analysts' expectations by posting strong third-quarter results based on solid product sales.

For the quarter ended 2 April, Seagate reported revenue of $1.805 billion and a net income of $82 million - equivalent to $0.34 per share. This compares with the same period last year when, despite revenue of $1.675 billion, the company posted a loss of $129 million or $0.53 per share.

Seagate's losses last year were caused by huge restructuring charges as the vendor repositioned itself to combat excess inventories and falling prices. Businesses were sold off and plants closed as the company's manufacturing processes were overhauled. These changes helped Seagate's return to profitability.

This year, restructuring charges were significantly less - $60 million compared with $142 million last year. If restructuring and related costs are excluded from the results, profit for the quarter would be $0.49 per share compared with a loss of $0.10 per share in 1998.

Seagate has not yet accounted for the financial impact from the proposed sale of its software subsidiary's network and storage management group. The sale, to Veritas Software, is expected to be completed in May.

It is also still in debate with the Securities and Exchange Commission over accounting from the acquisition of Quinta in August 1997.

Another change in accounting procedure will have a negative impact on next quarter's results. Seagate will no longer recognise the revenue of sales to its North American distributors until they have shipped the goods out.