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Seagate Technology (NYSE: STX) is set to report earnings after the close. Shares are up 4% despite the softening of expectations to the point that the company is now expected to lose money.

Over the last 90 days, estimates have gone from OK, to bad, to justawful.  Thomson Reuters (First Call) had estimates at more than $0.30just a quarter ago.  These estimates are now -$0.05 EPS now, andrevenue is expected to be $2.46 billion. As far as how big of a dropthis represents, the company’s revenue in the prior sequential quarterwere $3.03 billion and a year ago they were $3.42 billion.

Seagate is hunkering down for layoffs as well.  That endless demand for storage turns out to be not quite endless after all.  We should get more data on just how extensive those will be.  But this will also set the expectations for a slow environment for far more than just the next few months.

Despite a 4% gain to $4.05 today, the stock’s performance has been just nasty.  Its 52-week trading range is $3.67 to $24.11.With a $4.00 handle, we do not even hold any weight in optionsanalysis.  To make matters worse (or just more of the same), analystswere way behind the curve and the average price target would be animplied 75% to 100% gain if they are adequately updated.

Seagate is unlikely to offer much in firm guidance.  With Intel settingthe no guidance trend, it is hard to imagine any other major componentand consumer electronics-tied giant trying to offer anything bold.  Butif it does offer guidance, the next quarter estimates are -$0.08 EPSand $2.19 billion in revenues.

It is hard to get excited at all here ahead of earnings.  Yet it isvery puzzling that there is a rally ahead of results when the companyhas already been extremely cautious.  As of its last quarter, thecompany still has more than $1.15 billion in cash and equivalents.

Jon C. Ogg
January 21, 2009