Seagate (STX) shares down after company agrees to $300 million fine
- Seagate Technology shares dipped 3% on markets open after the company's financial results.
- STX stock price also fell after Seagate agreed to a $300 million fine for its sales of hard drives to Huawei.
- The company will pay the fine in installments of $15 million every quarter for five years.
STX share price was also down following news that the US Department of Commerce’s Bureau of Industry and Security (BIS), had imposed a $300 million penalty on the computer storage provider over its continued business dealings with Huawei.
Seagate fined $300 million for Huawei suppliesCopy link to section
According to BIS, Seagate had sold over $1 billion worth of hard drive disks to the Chinese company, even with full knowledge that the US had blacklisted it over issues of national security.
Documents show that Seagate had become the exclusive provider of HDDs to Huawei, with 7.4 million HDDs shipped to the China-based firm between August 2020 and September 2021. BIS alleged Seagate netted roughly $150 million in profit.
The $300 million fine is the largest ever BIS has imposed on a company and will be payable in $15 million installments every quarter for the next five years. Seagate has agreed to the penalty and the indicated terms, as well as to three audits.
STX stock price – what’s the outlook?Copy link to section
Following the development, Seagate pushed its fiscal third-quarter results from Wednesday 19 April to Thursday, 20 April, with the move contributing to the premarket downside. STX share price was at $61.01, nearly 6% down in the past five days. The shares are however 18% up year-to-date, with a 52-week high of $88.27 and 52-week low of $47.47.
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STX has rebounded off the $60 area as support in recent weeks and could be critical again as buyers target a continuation of the YTD momemtum.
Commenting on the fiscal third-quarter results, Seagate CEO Dave Mosley said:
“We are seeing a more elongated customer inventory correction that led to weaker than expected nearline demand among a few large customers late in the quarter. Consequently, our March quarter revenue came in at the low-end of our guidance range, which along with underutilization charges and other factors had a severe impact on our reported margins and profitability.”
According to Mosley, the company expects demand recovery to start spiking later in the year, with the plan being to focus on its product roadmap.