Seagate 2005 Annual Report Download - page 40

Table of Contents
ITEM 7.
MANAGEMENT
’
S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations for the fiscal years ended June 30, 2006, July 1, 2005
and July 2, 2004. Unless the context indicates otherwise, as used herein, the terms “we,” “us” and “our” refer to Seagate Technology, an
exempted company incorporated with limited liability under the laws of the Cayman Islands, and its subsidiaries.
You should read this discussion in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and
Supplementary Data” included elsewhere in this report. Except as noted, references to any fiscal year mean the twelve-
month period ending on
the Friday closest to June 30 of that year.
Our Company
We are the leader in the design, manufacturing and marketing of rigid disc drives. Rigid disc drives, which are commonly referred to as
disc drives or hard drives, are used as the primary medium for storing electronic information in systems ranging from desktop and notebook
computers, and consumer electronics devices to data centers delivering information over corporate networks and the Internet. We produce a
broad range of disc drive products that make us a leader in the industry with products addressing enterprise applications, where our products
are used in enterprise servers, mainframes and workstations; desktop applications, where our products are used in desktop computers; mobile
computing applications, where our products are used in notebook computers; and consumer electronics applications where our products are
used in a wide variety of devices such as digital video recorders (DVR), digital music players and gaming consoles.
We sell our disc drives primarily to major original equipment manufacturers, or OEMs, and also market to distributors under our globally
recognized brand name. For fiscal years 2006, 2005 and 2004, approximately 72%, 72% and 64%, respectively, of our disc drive revenue was
from sales to OEMs, including customers such as Hewlett-Packard, Dell, EMC, Microsoft and IBM. We have longstanding relationships with
many of these OEM customers. We also have key relationships with major distributors, who sell our disc drive products to small OEMs,
dealers, system integrators and retailers throughout most of the world. Also, we are currently expanding our direct sales to retailers. For fiscal
years 2006, 2005 and 2004, approximately 30%, 31% and 29%, respectively, of our disc drive revenue came from customers located in North
America, approximately 27%, 28% and 33%, respectively, came from customers located in Europe and approximately 43%, 41% and 38%,
respectively, came from customers located in the Far East. Substantially all of our revenue is denominated in U.S. dollars.
On May 19, 2006, we acquired Maxtor Corporation in a stock for stock transaction. We expect the acquisition of Maxtor to build on our
foundation as the leading global disc drive company, leveraging the strength of our significant operating scale to drive product innovation and
maximize operational efficiencies. We believe the combined company will be well-positioned to accelerate delivery of a diverse set of
compelling and cost-effective solutions to the growing customer base for data storage products.
The acquisition provides us with enhanced scale, greater capacity and an increased customer base which we expect will allow us to
eventually achieve significant cost synergies from leveraging our research and development platform, reducing product and supply chain costs,
as well as scaling our sales, marketing and administrative infrastructure. We also acquired a final assembly and test manufacturing facility in
Suzhou, China, significantly increasing our China-based manufacturing presence, as well as the retail and branded solutions operations of
Maxtor and the right to use the Maxtor brand and other related trade names. The acquisition has also provided us access to talented personnel in
the branded solution, product development, and other key functional areas.
We are engaged in integration and restructuring processes whereby we are working with Maxtor’s customers to quickly replace Maxtor-
designed disc drive products with Seagate-designed disc drive products. We expect this process to be substantially complete by the end of
calendar year 2006. We foresee there to be a
38