Seagate 2003 Annual Report Download - page 29

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Table of Contents
Fiscal Year 2004 Compared to Fiscal Year 2003
Fiscal Year Ended
July 2,
2004
June 27,
2003
June 28,
2002
100
%
100
%
100
%
Cost of revenue
77
73
74
Gross margin
23
27
26
Product development
11
10
12
Marketing and administrative
5
6
8
Amortization of intangibles
—
—
—
Restructuring
—
—
—
Income from operations
7
11
6
Other income (expense), net
—
(
1
)
(2
)
Income before income taxes
7
10
4
Provision for (benefit from) income taxes
(2
)
—
1
Net income
9
%
10
%
3
%
Revenue. Revenue for fiscal year 2004 was $6.224 billion, down 4% from $6.486 billion in fiscal year 2003. The decrease in revenue
was primarily due to price erosion, particularly with respect to our enterprise storage products, partially offset by an increase in unit shipments.
Our unit shipments increased from 68 million units in fiscal year 2003 to 79 million units in fiscal year 2004. This increase in unit shipments
was primarily in our desktop storage products and was due to an increase in the total available market, as well as our share of the total available
market. Additionally, shipments increased as a result of the introduction of our mobile computing storage product.
Our overall average unit sales price for our rigid disc drive products was $81, $80, $76 and $71 for the first, second, third and fourth
quarters of fiscal year 2004, respectively. Average annual price erosion from fiscal year 2003 to fiscal year 2004 was approximately 18%.
Unit shipments for desktop storage disc drives were 59.0 million for fiscal year 2004, up from 52.3 million in fiscal year 2003. However,
we did experience a slight decline in drive shipments for desktop applications in the fourth fiscal quarter which can be attributed to an
unexpected decline in industry distribution channel sell-through. Despite this decline, we believe that we maintained our market share.
Unit shipments for enterprise storage disc drives were 10.4 million during fiscal year 2004, slightly down from 10.5 million in fiscal year
2003; and, although we continue to experience aggressive pricing, we believe we maintained our market share.
During fiscal year 2004, we shipped 3.6 million mobile computing disc drives. We continue to be impacted by our limited product set for
this market and our concentrated customer base. We also experienced aggressive pricing in the first half of calendar year 2004. As we leverage
this product platform and expand our product offerings later in calendar year 2004, we expect to penetrate more of the mobile computing
market and capture additional customers, revenue, and market share.
Unit shipments for consumer electronics storage disc drives were 6.3 million during fiscal year 2004, which represents a 33% increase in
shipments from fiscal year 2003. This reflects strong growth in shipments to DVR consumer electronics applications. Until now, we have only
participated in the portion of the consumer electronics market where 3.5-inch form factors drives are utilized. Beginning in our first fiscal
quarter of 2005, we will add to our consumer electronics offerings with the previously announced ST1, our new 5 gigabyte,
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