Seagate (STX) Last Update 3/30/21
Related: NTAP WDC
% of Stock Price
Gross Profits
Free Cash Flow
Client Compute
Net Debt
14.4% $12.77
Trefis Price
Top Drivers for Period
Key Drivers
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TREFIS Analysis

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Potential upside & downside to trefis price

Seagate Company


  1. Enterprise & Cloud Storage constitutes 46% of the Trefis price estimate for Seagate's stock.
  2. Client Non-Compute constitutes 41% of the Trefis price estimate for Seagate's stock.
  3. Client Compute constitutes 13% of the Trefis price estimate for Seagate's stock.


Q2 '21 Earnings

Seagate reported net sales of $2.62 billion in Q2 '21, down from $2.7 billion in Q2 '20. Operating expenses dropped at the same rate, and a marginally lower tax rate meant that net income came in at $280 million, down from $318 million. This saw EPS drop by $0.09 to $1.12.


Seagate is a leading provider of electronic data storage products such as hard disk drives for personal storage and enterprise applications. Its main products are hard disk drives or HDDs. Disk drives are the principal medium of mass data storage and they store digitally encoded data on rapidly rotating disks with magnetic surfaces. The popularity and sales of disk drives are driven by performance attributes such as quality, cost effectiveness and energy efficiency. Over the last couple of years, solid state drives (SSDs) have been gaining popularity. These drives do not contain mechanical or rotating parts, thereby consuming less power and not prone to failure as traditional hard disk drives. Seagate manufactures electronic data storage products addressing a broad spectrum of clients such as enterprise applications, client compute applications, and client non-compute applications.

In the enterprise application market, its products are designed for servers, mainframes and workstations. The client compute application products are designed for desktop and notebook computers, to be used as primary storage in these devices and Seagate supplies to manufacturers of these laptop computers. In the client non-compute application product line, products are designed for a wide variety of personal and end user devices such as digital video recorders, gaming consoles, personal data backup systems, portable external storage systems, network attached storage, and digital media systems.

A majority of its revenues can be attributed to supplying storage for OEM's such as Dell and HP. In recent years, Dell Inc. accounted for approximately 10%-12% of consolidated revenue, down from mid teens in previous years. Similarly, Hewlett-Packard Company accounted for less than slightly less than 10% in recent years, down from 12-13% of consolidated revenue in previous years.

It also provides data storage services for SME's which include online backup, data protection and recovery solutions.


Enterprise Storage Unit Sales

We estimate that the enterprise and cloud storage business of Seagate, driven by a robust growth in the cloud computing industry will become the most valuable division by the end of our forecast period.

Flash-based Enterprise Storage Helps Margins

Flash-based storage has higher margins than traditional HDDs. Seagate also acquired Avago Technologies-owned LSI's flash business to enhance its flash portfolio. However, NAND pricing has seen significant declines in the recent past, given the transition to 3D NAND, and this has impacted the average selling prices of flash based products.


The high growth of digital content is driving the need for higher storage capacity to store, aggregate, host, distribute, manage, backup and use digital content. The need to access rich data and content is being driven by a highly mobile and increasingly connected user base. The traditional enterprise and client compute markets will continue to demand high capacity storage solutions and will be best served by hard disk drives where manufacturers compete on the ability to deliver cost effective, reliable and energy efficient mass storage devices. The increasing demand for HD content for media consumption and rich formats such as HD DVD and Blu-Ray drives the demand for high capacity disk drives solutions in the end-user market. The need for storing data locally is counteracted by the growing presence of cloud-based storage, which eliminated the need to backup data or fear losing data. Moreover it is universally accessible, which makes it a lucrative option. Consequently, large data centers are growing in numbers and the need to store data locally (on embedded hard drives or external disks) is declining.

Shift From Hard Disk Drives To Solid State Drives

All leading laptop manufacturers are now offering laptops with a hybrid HDD-SSD primary memory and high-end high-performance laptops with complete SSD memory. Solid state drives are much more expensive per GB and this is the primary reason for the slow adoption of SSD as the primary memory component. As production capacity increases and technology changes leads to a drop in SSD prices, we can expect that solid state drives will become a standard for notebooks and netbooks.

A slowdown in PC market

PC market witnessed a slowdown in late 2014 and through 2015 due to the anticipated release of Windows 10 in mid 2015. As a result of low desktop and notebook sales, shipments of hard drives for PC and laptops suffered through 2015. Sales growth could remain flat in the near term.

Growth In Cloud Computing And Remote Storage Services

We expect Seagate's enterprise business to be driven by businesses deploying cloud computing environments in an effort to pool resources and cut costs. Remote storage is becoming a standard for most enterprises and has even gained traction with retail customers with services like Dropbox, Skydrive and Google Drive.

To achieve the high performance needed with cloud computing, we can expect the hybrid SSD-HDD enterprise storage drives to become popular in the future.

Industry Consolidation

The storage industry as a whole is going through a phase of consolidation, as companies are unable to keep up with the constant need to improve manufacturing efficiency, the capital required for R&D and staying ahead of changing trends such as the shift to SSD. Seagate acquired Samsung Electronics's hard disk drive business in December of 2011, and Western Digital purchased Viviti Technologies Ltd. (formerly Hitachi Global Storage Technologies) in March of 2012. Western Digital then acquired Virident, sTec and Velobit in 2013 to enhance its flash portfolio. SanDisk acquired PCIe storage maker Fusion-io in 2014 and Seagate acquire the PCIe flash business of Avago-owned LSI. We expect further consolidation as bigger players buy out small and niche players to obtain market share and more importantly gain access to research in the areas of high speed flash storage and solid state drive technology.


Below are key drivers of Seagate's value that present opportunities for upside or downside to the current Trefis price estimate for Seagate:

  • Enterprise and Cloud storage revenues: The enterprise storage division has grown significantly in the last few years, with the revenues growing at high single digits from 2009 through 2013. However, growth has slowed down to about 3-4% from 2014 through 2018. We estimate that Seagate's enterprise and cloud storage business, driven by robust growth in the cloud computing and enterprise storage industry, will become the most valuable division by the end of our forecast period. If the revenue growth slows down to flat growth through the end of our forecast period, we can expect a potential downside of about 10% to the current price estimate

  • Non-Compute Segment Revenues: Consumer electronics storage business includes embedded storage for TV, DVRs, gaming consoles and other media devices has grown significantly in the last few years. The number of units sold in the consumer electronics and external storage combined have grown at a CAGR of over 5% from 2010 to reach 52 million units sold in 2016. The company subsequently stopped reporting units shipped. We estimate division revenues to grow more moderately at a CAGR of 2-3% through the end of our forecast period. If enterprise and cloud-based storage gains more popularity than anticipated, and starts cannibalizing the consumer electronics market, the growth rate of consumer electronics and personal storage products could slow down. We can expect a potential downside of about 5% to the current price estimate if the non-compute segment revenues remain more or less constant.

  • Compute segment revenues: The laptop and desktop storage revenues have declined in recent years. Despite the decline in cost per GB, there is an increase in average capacity per drive. Revenues are expected to continue to decline in the coming years, albeit at a slower pace from historic levels. We can expect a potential upside of about 5% to the current price estimate, if the revenue grows at low single digits through the end of our forecast period.

  • For additional details, select a driver above or select a division from the interactive Trefis split for Seagate at the top of the page.