Ah yes, the mobile/wireless age. Just down the road, everyone will carry their computer to work, in space-age, wafer-thin notebook forms, which will also do yeoman duty as phones and wireless reading devices.Well, here's a little attention-getter: traditional, desktop, bulky PCs will dominate the market, led by office purchases, for the next 3-5 years, and probably longer. The mobile cubicle may be on the rise, but the office cubicle isn't disappearing, and that's a good reason to own Seagate Technology (NASDAQ: STX).
Seagate, one of the world's largest manufacturers of hard disc drives, has taken it on the chin lately, largely due to the PC sales slump. Desktop drives account for about 61% of revenue; mobile computers, 15%; electronics, 13%, and enterprise, 11%. FY2009 revenue is expected to fall 20-25%, before recovering to single-digit growth in FY2010. The First Call F2009/F2010 EPS estimates for STX are a loss of 53 cents to a profit of 79 cents.
Shares have rebounded to around $10 from their nadir near $3 earlier this year, but look for short-term players to exit STX in the next quarter - taking their tidy 60%-or-so, three-month flip - due to the PC sector's aforementioned doldrums. The play, then? Use that pull-back as an opportunity to scoop-up some shares: STX is not low-risk, but the company has taken strides to lower costs and it remains a force in the sector, ready to ramp-up production, when the tide comes back in.
Stock Analysis: Seagate Technology is a moderate-risk stock. Consider buying a 25% position in STX on a pull-back to $7-8.50: keep in mind that STX may not pull-back to those levels. Then buy another 25% in four months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your STX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $4.25.
- -
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
