Seagate 2003 Annual Report Download - page 9

Table of Contents
Consumer Electronics Storage
U Series and Barracuda ATA/SATA Family . The U-9 Series of rigid disc drives are used in new markets, including personal video
recorder (PVR), video game consoles, audio jukeboxes, home media centers, and home and industrial security systems. The Barracuda 7200.7
is used in PVR’s and the U Series X is used in PVR’s and gaming applications. Our consumer electronics (CE) drives feature quiet acoustics,
high reliability and high performance streaming.
Mobile Computing
Momentus Family. Momentus is our introductory mobile computing rigid disc drive product. The current Momentus rigid disc drives
target only a portion of the mobile computing market. Commercial uses for Momentus rigid disc drives include notebook computers running
popular office applications and laptops for business, government and education environments. Consumer uses for Momentus rigid disc drives
include home notebook computers, tablet computers and digital audio applications.
Customers
We sell our rigid disc drive products primarily to major OEMs and distributors. OEM customers incorporate our rigid disc drives into
computer systems and storage systems for resale. Distributors typically sell our rigid disc drives to small OEMs, dealers, system integrators and
other resellers. Shipments to OEMs were approximately 60%, 61% and 66% of our revenue in fiscal years 2004, 2003 and 2002, respectively.
Shipments to distributors were approximately 40%, 39% and 34% of our revenue in fiscal years 2004, 2003 and 2002, respectively. Sales to
Hewlett-Packard accounted for approximately 19% and 18% of our rigid disc drive revenue in fiscal years 2004 and 2003, respectively. Sales
to Hewlett-Packard and Compaq together accounted for approximately 20% of our rigid disc drive revenue in fiscal year 2002. No other
customer accounted for 10% or more of our rigid disc drive revenue in fiscal years 2004, 2003 and 2002. Also, we are currently expanding our
direct sales to retailers. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk
Factors—Risks Related to Our Business—Dependence on Key Customers.”
OEM customers typically enter into master purchase agreements with us. These agreements provide for pricing, volume discounts, order
lead times, product support obligations and other terms and conditions. The term of these agreements is usually 12 to 36 months, although our
product support obligations generally extend substantially beyond this period. These master agreements typically do not commit the customer
to buy any minimum quantity of products, or create exclusive relationships. Deliveries are scheduled only after receipt of purchase orders. In
addition, with limited lead-time, customers may cancel or defer most purchase orders without significant penalty. Anticipated orders from
many of our customers have in the past failed to materialize or OEM delivery schedules have been deferred or altered as a result of changes in
their business needs.
Our distributors generally enter into non-exclusive agreements for the redistribution of our products. They typically furnish us with a non-
binding indication of their near-term requirements and product deliveries are generally scheduled based on a weekly confirmation by the
distributor of its requirements for that week. The agreements typically provide the distributors with price protection with respect to their
inventory of our rigid disc drives at the time of a reduction by us in our selling price for the rigid disc drives and also provide limited rights to
return the product.
We also regularly enter into agreements with our customers, which obligate us to provide a limited indemnity against losses resulting
from intellectual property claims. These agreements are customary in our industry and typically require us to indemnify our customer against
certain damages and costs incurred as a result of third party intellectual property claims arising as a result of their use of our products.
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