Shares of both Seagate (STX) and Western Digital (WDC) are getting battered on fears that the hard-drive sector could once again soon find itself with a glut of supply.

At least in part, the Street is reacting to this morning’s downgrade of Marvell (MRVL) by Barclays Capital, which–as I noted earlier–was in response to indications from Taiwanese component makers of a slowdown PC demand. Barclays chip analyst Romit Shah wrote that “every company that we met with [in Taiwan] indicated that PC order rates are slowing into the back-to-school season.”

Meanwhile, Collins Stewart analyst Ashok Kumar today notes new data on drive production that he thinks raises ominous clouds for Seagate in particular. Kumar says data from Techno Systems Research, a Japan-based market research firm, find that hard-drive unit production was down 18 percent sequentially in the March quarter, comparable to a 15 percent decline in PC shipments.

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Hutchinson Technology (HTCH) shares have collapsed after the company disclosed that Seagate (STX) intends to phase out the purchase of suspension assemblies from the company. Hutchinson says the change will occur over 18-24 months. In the March quarter, Hutchinson said, Seagate was about 19 percent of sales.

The disk-drive component supplier also warned that March quarter results disappointed. The company said it shipped 107 million suspension assemblies in its fiscal second quarter ended March 20, down from 155 million in the December quarter. Combined shipments for the mobile and enterprise segments were down more than 50 percent sequentially, while shipments for the 3.5-inch ATA segment increased sequentially.

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Seagate (STX) CEO Steve Luczo this afternoon said a sharp dropoff in demand in December as the PC market weakened was the primary reason for the company’s larger-than-expected December-quarter loss.

In an interview with Tech Trader Daily, Luczo said the company’s total addressable market appeared to be in the 150 million unit range entering the quarter, and still appeared to be that large well into November. But he says that starting in the back half of that month, demand began to crumble: He thinks the TAM dropped to about 123 million drives. (That’s down from an estimated 150 million to 152 million in the September quarter.) He says customers began reducing inventory as end-user demand sagged; that in turn triggered a more aggressive pricing environment. Luczo says that in many markets Seagate serves, this has been “the steepest and longest” pricing decline in the history of the industry.

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To answer my own question, there’s probably nothing up with Seagate (STX). But the stock has spiked today even more than the broad market; and the stock Web site TheFlyOnTheWall.com asserts that the disk drive maker is being lifted by “renewed buyout chatter.”

Now, certainly you can see why people would fantasize about a Seagate LBO; the company was taken private in 2000 in a highly profitable buyout by Silver Lake Partners; the theory would be, well, why not give it one more go-round.

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Seagate (STX) CEO Bill Watkins says some of his Asian competitors in the hard disk-drive market are in “really bad shape” and could be forced to team up to stay in business. In particular, he thinks Toshiba, Fujitsu and Samsung are suffering large losses; he thinks Toshiba and Fujitsu make “try to get together.”

Watkins made his remarks in an interview this afternoon with Tech Trader Daily following the company’s announcement of third-quarter results. While the September quarter numbers weren’t bad, the December outlook fell short of Street expectations, and the stock is trading lower after hours.

Watkins says that “bizarre as it sounds,” he feels better about Seagate’s business now then he did in June, noting that the company has made improvements in inventory turns, trimmed operating expenses and sped up the introduction of some new products. He says that business in October “looks pretty good, to be honest,” but that no one knows how things will go for the rest of the December quarter. Watkins says the PC manufacturers are like “deer in the headlights,” after failing to see a back-to-school demand pickup, and aren’t sure what happens in terms of fourth-quarter sales.

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Yesterday afternoon, I posted a list of how some of the most prominent stocks fared in Wednesday’s mammoth selloff.

Given today’s equally dramatic rally, I thought the list deserved an update–I’ve added just one stock, Microsoft (MSFT), which I inexplicably forgot to include yesterday. All of the stocks on the list were down yesterday, except Dell (DELL), which had been hit on Tuesday, and Seagate (STX), which was unchanged. Today, all the stocks on the list were higher, except for VMware (VMW) and its parent, EMC (EMC). The one stock that best captured what’s been going on: Western Digital (WDC), down $1.89 yesterday, up $1.89 today.

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Marvell (MVRL) shares are down sharply again today, pressured this morning by Deutsche Bank analyst Arnab Chanda, who cut his rating on the stock to Hold from Buy. He cut his target price on the stock to $15 from $20.

“Following checks with industry contacts, we believe Marvell is not likely to see significant upside in the next six months, both due to weakness in Europe and Asia, as well as slower-than-expected product ramps” at Research In Motion (RIMM) and Seagate (STX), he wrote in a research note. “While we recognize that the company detailed some of these issues in their recent conference call, we still believe that it is prudent to move to the sidelines, given estimates could get cut” into fiscal Q4.

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Everything is lost… unless you buy a Seagate hard drive. Picture a young mother fretting over losing photos of her adorable brood, or a 30-something man afraid he might lose the countless hours of music he’s stored on his PC. These images will hit the airwaves in December courtesy of Seagate, the disk drive maker. They are part of the company’s first television campaign aimed at consumers.

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Seagate (STX) this afternoon said it is shifting its stock exchange listing to Nasdaq, where the cool kids hang out, from the New York Stock Exchange, while maintaining its current stock symbol. In a statement, CEO Bill Watkins said the move ensures that investors “have access to fast, high-quality trades in a more cost-effective structure for Seagate.”

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While munching on a reuben at Birk’s, a steakhouse in Silicon Valley, Seagate CEO Bill Watkins is explaining why he’s not too worried about these trendy new laptops that have everything but a hard drive. On the surface, this would seem to be a big problem. Seagate, after all, is the world’s largest hard-drive maker, with expected sales of more than $3 billion this quarter–so Watkins likes to see his wares go into more gadgets, not fewer.

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