Is Seagate Technology PLC (STX) for Sale?

Back in 2010, a group of private equity firms offered to take Seagate Technology PLC (NASDAQ:STX) private, but the company’s management thought the price was too low. It turns out they were right, as Seagate stock has since appreciated nearly 150%. The pursuers have since left the company alone at the same time as hedge fund gurus began buying up shares — including Eddie Lampert and David Einhorn. But last Friday, some rumors flew that Seagate was once again on the shopping list of buyout firms, sending shares up. Is Seagate for sale?

Seagate Technology PLC (NASDAQ:STX)According to The Fly On The Wall, a Wall Street rumor mill, the big boost in Seagate’s shares on Friday was due to takeover chatter. It was enough to send both Seagate and competitor Western Digital Corp. (NASDAQ:WDC) up roughly 2 points.

The thing is, I don’t find Seagate to be in the kind of deep water that, say, Dell Inc. (NASDAQ:DELL) or Best Buy Co., Inc. (NYSE:BBY) are in. Sure, The PC is dead and yada, yada, yada, but Seagate has incredibly strong cash flows and a growing enterprise hard drive business. It certainly does not need a cash infusion. I suppose the worst thing the company has going against it right now is its affiliation with said PC. But would that be enough to prompt buyout firms to make yet another pass at Seagate? The company was taken private in 2000 by Silver Lake Partners only to IPO again in 2002.

The strongest argument for a buyout is valuation. Even though the company has performed well over the last couple of years, it is still trading at just 4.6 times trailing earnings, and only 6.4 times forward earnings. That’s about as cheap as it gets for a technology company of this size. I have long been a Seagate bull, and I expect multiple corrections once the PC-ocalypse noise settles, but I suppose some deep-pocketed firms could see the value in taking the company off the exchanges for the time being.

Bottom line
All things considered, I’m throwing the challenge flag on this rumor. I may be wrong, but I cannot see Seagate management responding favorably to any buyout offer at this point in time. Steve Luczo and team are dedicated to enhancing shareholder value by returning the vast majority of the rich cash flows to investors and investing in future technologies to propel the company into the next era.

Of course, keep an ear close to the ground. Who knows what might pop up with private equity firms looking itchy to shop.

The article Is Seagate for Sale? originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!