Seagate Technology (STX) Monday said it expects better-than-expected third-quarter revenue while also saying it has adopted a policy of not paying a quarterly dividend. The company also provided revenue guidance for the fourth quarter. In a separate communique, Seagate said that it intends to offer $430 million aggregate principal amount of senior secured second-priority notes due 2014 in a private placement.

For the third quarter, the company now expects revenue of $2.1 billion, compared with its prior outlook range of $1.6 billion -$2 billion. The company also expects unit shipments of approximately 39 million for the quarter.

On average, 15 analysts polled by Thomson Reuters expect the company to report revenue of $1.88 billion. Analysts' estimates typically exclude special items.

For the sequentially preceding second quarter, Seagate had reported revenues of $2.27 billion and a net loss of $496 million, or $1.02 per share.

Seagate believes the total available market, or TAM, for hard disk drives was in the range of 110 million -112 million units for the March quarter. Unit demand for the company's 2.5-inch and 3.5-inch ATA products was better than planned and the company gained significant share in each of these markets. Meanwhile, the company's leadership position in the enterprise market remained substantially unchanged from the prior quarter.

Seagate also said that the TAM for enterprise class products decreased an estimated 20% sequentially. In addition, the company shipped a higher mix of lower capacity desktop and notebook products than planned.

Further, Seagate sees gross margin as a percent of revenue of approximately 7% to 7.5%, better than the company's expectations due to higher volumes and effective spending controls.

Going forward, Seagate said that current uncertainty in global economic conditions makes it difficult to predict product demand and other related matters. It makes more likely that actual results could differ materially from current expectations, the company noted.

For the fourth quarter, the company expects revenues between $1.9 billion and $2.2 billion. Gross margin for the quarter is expected to improve by 300 - 400 basis points. Wall Street analysts expect revenues of $1.86 billion for the quarter.

The company also expects that June-quarter TAM, on a unit basis, will be flat compared with the March quarter. This is in contrast to the historical norms of a slight decrease, with pricing consistent with historical June quarters. Further, the company sees no significant increase in the TAM for the enterprise market and expects to maintain its leading share position in this market in the June quarter.

According to the company, cash, cash equivalents and short-term investments as of April 3 totaled approximately $1.5 billion compared with $1.3 billion in the prior quarter. To further enhance liquidity, the company's management has recommended and the board has adopted a policy of not paying a quarterly dividend. This action is expected to reduce annual cash outflows by approximately $60 million.

Seagate is scheduled to report its full third quarter financial results on April 21. Among others in the sector, Western Digital Corp. (WDC) is expected to earn $0.10 per share in the third quarter, on revenues of $1.46 billion, according to Street analysts.

Separately, Seagate Monday announced its intention to offer $430 million aggregate principal amount of senior secured second-priority notes due 2014 in a private placement, subject to market and other conditions. The notes are expected to be issued by Seagate Technology International, an indirect wholly-owned subsidiary of Seagate. The notes will be guaranteed by Seagate, Seagate Technology HDD Holdings and all of Seagate's subsidiaries that guarantee its senior secured credit facility, on a full and unconditional basis and secured by a second-priority lien on the assets that secure the senior secured credit facility.

Seagate said it intends to use the net proceeds from the offering for general corporate purposes, including the repayment or repurchase of all or some of its $300 million aggregate principal amount of floating rate senior notes due October 1, 2009 and other indebtedness.

STX is trading at $6.20, down $0.45, or 6.77%, on a volume of 7.91 million shares.

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