Seagate Technology PLC (STX) Goes Hybrid: Apple Inc. (AAPL), Western Digital Corp. (WDC)

Plus, a case can be made that Microsoft’s soft Windows 8 sales have translated to year-over-year PC revenue declines from Dell Inc. (NASDAQ:DELL), which has packed its bags to regroup. Likewise, although Hewlett-Packard Company (NYSE:HPQ)‘s new line of ultrabooks are improved, Windows 8 did very little to revitalize sales. Consequently, HP’s still stuck trying to reinvent itself. In other words, the PC death effect is real. So it’s not exactly reassuring to hear Seagate Technology PLC (NASDAQ:STX) describe its hybrids as turbo-charged PCs.

How long can this transition last?
I’m not certain that producing new hybrid drives is enough to get investors excited. It gets the job done from the standpoint that it’s an important intermediate step, but that’s as much credit I’m willing to give. Granted, personal computers are not going to vanish overnight. But it’s no longer a growth business, either. And Seagate’s second-quarter results revealed some underlying weaknesses.

Average selling prices, or ASPs, fell 7% year over year and 3% sequentially. ASPs also hurt profitability as the company struggled with product mix. And even though margins arrived in line with estimates, they weren’t very strong. The company posted 4% year-over-year drop in gross margin, while shedding 1.5% sequentially. Similarly, there was a 8% decline in operating income, which fell 13% from the first quarter. It’s still unclear how Seagate is going to sustain this transition without near-term changes to the business model.

What of the stock?
The stock is cheap, but there’s no compelling reason to buy here. While the fundamentals are indeed solid, the long-term risks are still there. And placing a bet here assumes that there will be a reversal of fortune at some point. And investors have to decide how much time this company has.

Fool contributor Richard Saintvilus owns shares of Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, Microsoft, and Western Digital.

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