Melissa Bockhold Heather Coddington - Franklin College

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The next ratio we calculated was Net Working Capital Turnover. This ratio tells us how much work we are getting out of our net working capital. A higher ratio is desired because it means the company is getting more out of every dollar of net working capital. Seagate’s ratio is 3.84, the lowest of all competitors. The highest ratio is Western Digital, which turned over net working capital 38.43 times in 1999. This discrepancy between Western Digital and Seagate is another relative issue. Western Digital has been performing relatively poorly in our fundamental analysis of Seagate and their competitors, so why do they have such an appealing NWC turnover? The answer is simple. Seagate has $1,773 million in NWC in 1999, Western Digital had only $72 million, and Seagate’s 1999 sales were 2.5 times greater than Western Digital’s. Fixed Asset Turnover is a measure of sales a company generates for every one dollar in fixed assets. Seagate turns over its fixed assets 4.03 times, so, they generate $4.03 in sales for every dollar of fixed assets. Maxtor is the highest in this category, generating about $22.31 for every dollar of fixed assets. Total Asset Turnover is the same idea as the Fixed Asset Turnover; it takes into account total assets not just fixed assets. Our ratios show that for every dollar of total assets, Seagate generates $0.96. The highest company is once again Maxtor, with $2.79 in sales for every dollar of total assets. Because Seagate is vertically integrated, they have higher levels of fixed assets then their competition. These higher levels will cause their Fixed and Total Asset Turnovers to be lower. The Profit Margin is the first of three ratios we examined to measure how efficiently a company uses its assets and manages its operations. Specifically, the Profit Margin tells us how much profit is generated for every dollar of sales. In most cases, a 32
higher Profit Margin is more desirable. Seagate’s Profit Margin, the highest in the group, is 17%, meaning that they generate about $0.17 profit on every dollar of sales. Western Digital is the lowest this time with a Profit Margin of -18%. So, in theory, they are losing $0.18 on every dollar of sales. The Return on Assets (ROA) is a measure of profit per dollar of the company’s assets. In 1999, Seagate had a 16.63% return per dollar of assets, the highest among competitors. The lowest ROA was Western Digital with -48%. A higher ROA is more desirable because it means that the company is making more per dollar of assets. A company’s Return on Equity (ROE) is similar to the ROA, except it is the profit per dollar of the company’s equity. In 1999, Seagate’s ROE was 33%. The lowest was Quantum with -19%. Since Western Digital’s net income and shareholder equity were both negative in 1999, we did not calculate this ratio for them. The Earnings per Share (EPS) Ratio is a measure of how much profit is accrued by the shareholders for each share of stock. Seagate’s EPS was $5.17, the highest, while Western Digital had the lowest at -$3.82. The last ratio we looked at was the Price/Earnings (P/E) Ratio. This ratio tells us how much a share is selling for compared to its earnings. Seagate’s P/E is 12.41, which is to say that shares are selling at 12.41 times earnings. Maxtor is the highest with shares going for 42.45 times earnings, and Quantum has the lowest with -4.79 times earnings. When looking at how Seagate is fairing against their competition, we also looked at market share and the historical operating performance and capitalization ratios for Seagate and the U.S. disk drive industry from 1981 to 1999 (Andrade 12). The table below shows the averages for each. 33
Page 1 and 2: Seagate Technology Buyout By: Melis
Page 3 and 4: I. INTRODUCTION In 1999, Seagate Te
Page 5 and 6: 1997 1997-1998 July 1998 May 1999 J
Page 8 and 9: B. Competition Competition is the m
Page 10 and 11: to twelve months, is a new opportun
Page 12 and 13: inventories of disk drive component
Page 14 and 15: was to turn the company private sin
Page 16 and 17: STEP TWO: Seagate exchanges existin
Page 18 and 19: 100% 90% 80% 70% 60% 50% 40% 30% 20
Page 20 and 21: the value seen in its VERITAS holdi
Page 22 and 23: For all the reasons listed above, S
Page 24 and 25: large amount of confidence in Seaga
Page 26 and 27: capital structure should have a hig
Page 28 and 29: how capable a company is to pay bac
Page 30 and 31: 1.98. Although, Seagate is much low
Page 34 and 35: Seagate Averages (1981- 1999) Disk
Page 36 and 37: ii. Analysis of Historical Financia
Page 38 and 39: experience? What will their earning
Page 40 and 41: Lake and other potential investors
Page 42 and 43: CFO Kenneth Lonchar stated, “We w
Page 44 and 45: X. SILVER LAKE PARTNERS INTERVIEW M
Page 46 and 47: Copy of thank you note mailed to Al
Page 48: XII. WORKS CITED Austin, Alan. Mana

Melissa Bockhold Heather Coddington - Franklin College

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