Seagate Technology plc STX reported third-quarter fiscal 2015 non-GAAP earnings per share (excluding the impact of tax benefits, amortization of intangibles, restructuring charges and other one-time items) of $1.08, which came in line with the Zacks Consensus Estimate. However, non-GAAP earnings declined 19.4% year over year.

On a GAAP-basis, the company posted earnings of 88 cents per share compared with $1.17 reported in the year-ago quarter.

Quarter Details

Seagate reported revenues of $3.33 billion, which were down 2.2% year over year from $3.41 billion. Moreover, quarterly revenues missed the Zacks Consensus Estimate of $3.462 billion.

Seagate’s gross profit marginally declined to $955 million from $959 million reported in the year-ago quarter, mainly due to lower revenue base. However, gross margin improved 50 basis points (bps) year over year to 28.7%.

Operating income came in at $343 million versus $444 million reported in the prior-year period. Therefore, operating margin contracted 270 bps from the year-ago quarter to 10.3%, primarily due to higher operating expenses.

Seagate reported net income (excluding the impact of tax benefits, amortization of intangibles, restructuring charges, gain on arbitration award and other one-time items) of $357 million or $1.08 per share.

Seagate exited the quarter with cash and cash equivalents of $2.6 billion. Long-term debt stood at $3.46 billion.

Seagate generated $2.42 billion from operating activities in the first nine months of fiscal 2015 compared with $1.98 billion in the same period last fiscal year. The company paid dividends worth $493 million and repurchased $907 million shares in the first three quarters of fiscal 2015.

Our Take

Seagate posted disappointing third-quarter fiscal 2015 results and also witnessed margin contractions.

Nonetheless, the company should benefit from the strength in its hybrid drives. Also, the company is focusing on the enterprise side, where it could acquire higher-margin business. Synergies from acquisitions and product innovations are the other growth catalysts.

However, sluggish macroeconomic conditions, a flattish price environment and competition from Western Digital Corp. WDC and SanDisk Corp. SNDK remain the near-term headwinds. Furthermore, continuing cannibalization of PCs by mobile devices could affect its future performance.

Currently, Seagate has a Zacks Rank #4 (Sell).

A better-ranked technology stock is Super Micro Computer, Inc. SMCI, sporting a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SEAGATE TECH (STX): Free Stock Analysis Report
 
WESTERN DIGITAL (WDC): Free Stock Analysis Report
 
SANDISK CORP (SNDK): Free Stock Analysis Report
 
SUPER MICRO COM (SMCI): Free Stock Analysis Report
 
To read this article on Zacks.com click here.