Seagate 2003 Annual Report Download - page 26

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Table of Contents
common stock held by New SAC. New SAC exercised this right and on July 30, 2003, we completed the secondary public offering of
69,000,000 of our common shares, of which 9,000,000 were sold pursuant to the underwriters’ exercise of their over-allotment option, all of
which were sold by New SAC, as selling shareholder, at a price of $18.75 per share. New SAC received proceeds of approximately $1.3
billion, after deducting underwriting discounts and commissions of approximately $39 million. We incurred direct expenses aggregating
approximately $1 million related to the offering. New SAC distributed its net proceeds to holders of its ordinary shares including
approximately $245 million distributed to our officers and employees who hold ordinary shares of New SAC. As of July 2, 2004, New SAC
owned 282,500,000 shares, or approximately 61.5% of our outstanding common stock.
Registration of Common Shares
On July 20, 2004, we filed a registration statement on Form S-3 with respect to 60,000,000 of our common shares owned by New SAC.
After this registration statement is declared effective by the SEC, New SAC may sell all 60,000,000 of these shares to the public. We will not
receive any of the proceeds from the potential sale of these shares. After such sale or sales of these common shares is completed, New SAC
will own 222,500,000 shares, or approximately 48.4% of our outstanding common stock (based upon our outstanding common shares as of
July 2, 2004).
Overview
Industry Overview. Our industry is characterized by several trends that have a material impact on our strategic planning, financial
condition and results of operations. Historically, our industry has been characterized by continuous and significant advances in technology,
which contributed to rapid product life cycles, the importance of being first to market with new products and the difficulty in recovering
research and development expenses. However, based upon the recent pace of new product introductions, we believe that our industry is
currently in a period in which the rate of increases in areal density, which is the storage capacity per square inch on a disc, is lower than the rate
of the last several years. The slowing change in areal density contributes to:
•
an increase in the rates of price erosion as the slowing areal density curve results in longer product cycles which permits more
competitors time to enter the market for a particular type of disc drive and, accordingly, increases competition based on price;
•
an increased importance of successfully executing product transitions, as factors such as quality, reliability and manufacturing yields
become of increasing competitive importance; and
We also believe that the industry is experiencing several positive trends relative to overall demand including:
•
a potential reduction in financial benefit from new product introductions due to declining cost reductions and the inability to
introduce new products at higher prices in traditional hard disc drive markets.
•
a proliferation of applications in the consumer electronics market that utilize disc drives. We estimate that in the most recent quarter
industry shipments of disc drives to non
-
gaming consumer electronic applications grew in excess of 200% from the year
-
ago quarter;
•
a renewed buying cycle for consumer and commercial client computing systems. We estimate that in the most recent quarter industry
shipments of disc drives for desktop and mobile computing storage applications grew 13% from the year-ago quarter, with the
desktop market increasing approximately 10% and the mobile computing market increasing 25%. We believe that a portion of the
growth in the mobile computing market is a result of consumers shifting from desktop computers to notebook computers, a trend that
we believe may be accelerating; and
25
•
growth in selected enterprise storage applications such as near-line and small form factor.