By Philipp Gollner

SAN FRANCISCO (Reuters) - Seagate Technology, the biggest U.S. computer hard-disk drive maker, said on Tuesday its quarterly net profit plunged 98 percent due principally to costs from acquiring rival Maxtor Corp.

Seagate also said it planned to repurchase as much as $2.5 billion of its stock over the next two years, after buying back about $400 million of stock in the quarter ended June 30.

Seagate shares fell 4.4 percent in extended trading to $19.80 after closing 3.5 percent lower on the New York Stock Exchange. Seagate said average selling prices fell as personal computer makers cut prices to compete, and it offered a revenue forecast for this quarter short of analysts' expectations.

"We've been very surprised at some of the pricing that some of the people have done in the market as they try to grab share," Chief Executive Bill Watkins said in an interview.

Net income in the fiscal fourth quarter declined to $7 million, or 1 cent per share, from $280 million, or 55 cents per share, a year earlier. Revenue matched Wall Street expectations, rising to $2.53 billion from $2.18 billion, helped by $279 million of Maxtor revenue.

Seagate said that in the fourth quarter it recorded $146 million of accounting charges related to the Bill Watkins Maxtor purchase and about $72 million of Maxtor's operating losses.

Excluding items related to the Maxtor purchase and other exceptional costs, Seagate said it had profit of $241 million.

Analysts, on average, had forecast earnings per share of 38 cents before special items and revenue of $2.53 billion, according to Reuters Estimates.

Chief Financial Officer Charles Pope acknowledged on a conference call with analysts that financial comparisons were difficult. "The bottom line is that the Seagate stand-alone operating results achieved the internal plan."

Seagate, based in Scotts Valley, California, acquired Maxtor in May for $1.9 billion to cement its position as the leading U.S. disk-drive maker and reduce costs while boosting revenue. Seagate announced about 6,000 job cuts at Maxtor after the acquisition, or about half of Maxtor's workforce.

Seagate, whose main competitors include Japan's Fujitsu Ltd. and Hitachi Ltd., forecast fiscal first-quarter earnings per share of 16 cents to 20 cents before certain items and revenue of $2.65 billion to $2.80 billion.

Analysts, on average, forecast first-quarter earnings before items of 41 cents and revenue of $2.86 billion.

The company said it expects to integrate Maxtor's operations by the end of this year. "We are confident that we will realize synergies sooner than anticipated," Chief Executive Officer Bill Watkins said on the conference call.

The company said average selling prices for Seagate-designed products fell about 7 percent from the quarter ended in March, "at the high end of the normal range for price erosion," and higher than the company's expectations.

For fiscal 2007, Seagate forecast earnings per share before certain items of $1.90 to $2.00 on revenue of $11.8 billion to $12.3 billion, compared with Wall Street's estimate of $2.14 per share before items and revenue of $12 billion.

Seagate's stock trades at about 10 times estimated earnings per share for 2006, slightly above competitor Western Digital Corp.'s multiple of nine. The shares have added about 7 percent since the day before Seagate announced the deal on Dec. 21.