Shares in hard disk-maker Seagate Technology PLC(NASDAQ:STX) fell after an analyst at Needham & Co downgraded the stock to 'Hold' from 'Strong Buy".
The stock was down 4.5 percent earlier in the day before pulling back slightly to trade at $31.72.
Needham analyst Richard Kugele said that there were signs of weakness across the hard-disk drive sector. He said his downgrade reflected "slower industry demand conditions, inventory at OEMs and share shifts."
He also said that the imminent release of Microsoft's Windows 8 operating system for personal computers was unlikely to stimulate demand for PCs and notebooks.
Kugele said that he had not rated the stock lower as “the company has significant cash flow being redeployed into buybacks and dividends, and should still maintain a margin profile well ahead of historical industry standards.”
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If the downtrend in demand for computers continued he forecast that during the September quarter sales would be i the region of 145 million to 155 million units.
Seagate will be holding a meeting with analysts on September 21 in New York. “We expect STX to talk about the current demand headwinds, but to really highlight the long-term data growth opportunity and the improved margin profile post industry consolidation,” Kugele wrote. “Generally, we expect a positive meeting amid weak demand.”
For the June 2013 fiscal year, Kugele now sees profits of $6.96 a share, down from $8.50; for FY 2014, he goes to $7.57, form $9.65.
Kugele left his strong buy rating on Seagate rival Western Digital Corp. unchanged on the grounds that the company has been conservative in its business forecasts.