Oct. 23, 2009 (Business Wire) -- Fitch Ratings has revised Seagate Technology's (Seagate) and subsidiaries Rating Outlook to Stable from Negative and affirmed the 'BB' Issuer Default Ratings (IDR) ratings.

Approximately $2.4 billion of total debt is affected by Fitch's action, including the company's $350 million secured revolving credit facility.

The revision in the Outlook to Stable from Negative reflects:

--Seagate's improved operational performance and industry pricing conditions: Significant profit margin expansion in the fiscal first quarter ended Oct. 2, 2009 despite a 27% unit decline in high margin mission-critical enterprise drives in the first nine months of calendar 2009 compared with the year-ago period. Gross margin increased to 24.5% for the quarter, representing a sequential and year-over-year increase of 600 and 700 basis points, respectively. The margin expansion is attributable to Seagate's transition to more cost-effective high capacity drives for the desktop (500-gigabyte [GB] per disk) and notebook (250-GB) markets and relatively stable pricing environment as industry-wide capacity reductions in the past 12-18 months and better than expected unit demand restored industry supply and demand;

--Material improvement in credit protection measures due to strengthened profitability with operating profit more than doubling in the quarter ended Oct. 2, 2009 compared with the year-ago quarter and significant debt reduction of approximately $700 million in fiscal 2010. As a result, Fitch estimates leverage declined to 2.4 times (x) from 5.5x in the June quarter. Fitch believes leverage could decline to 1x-1.5x by the end of fiscal 2010 (June 30).

--Strengthening liquidity profile due to limited debt maturities remaining in fiscal 2010, consisting of approximately $100 million of convertible senior notes due April 2010, full availability of the company's $350 million credit facility that was previously fully drawn in fiscal 2009 to bolster its cash position prior to the implementation of cost reduction initiatives. Lastly, the company maintains a significant cash position of $1.6 billion, excluding $166 million of restricted cash, as of Oct. 2, 2009 despite meaningful debt reduction.

The ratings are supported by the following factors:

--Broad product portfolio and leading market share in the overall hard disk drive (HDD) industry;

--The company's scale and vertically integrated model, which reduces per unit manufacturing costs;

--Continued growth of digital rich media by consumers and enterprise storage requirements bode favorable for longer-term HDD unit demand.