Seagate 2006 Annual Report Download - page 15

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Table of Contents
Europe, Africa and the Middle East. In addition, we have a sales operation group which focuses on aligning our
production levels with customers’ product requirements. Our sales force works directly with our marketing
organization to coordinate our OEM and distribution channel relationships. We maintain sales offices throughout the
United States and in Australia, China, France, Germany, Japan, Singapore, Taiwan and the United Kingdom.
With the acquisition of Maxtor, we acquired the right to the use the Maxtor and other related brand names. We
believe the Maxtor brand is a valuable asset, and we intend to continue to offer the Maxtor brand of products to
consumers globally to broaden our reach into and coverage of these channels as well as optimize the impact of our
marketing investments.
Our customer service organization maintains a global network of service points to process warranty returns and
manage outsourced repair vendors. We generally warrant our products for periods ranging from one year to five
years.
Foreign sales are subject to foreign exchange controls and other restrictions, including, in the case of some
countries, approval by the Office of Export Administration of the U.S. Department of Commerce and other
U.S. governmental agencies.
Competition
The markets that we compete in are intensely competitive, with disc drive manufacturers not only competing for
a limited number of major disc drive customers, but also increasingly competing with other companies in the
electronic data storage industry that provide alternative storage solutions, such as flash memory and SSDs. Some of
the principal factors used by customers to differentiate among electronic data storage solutions manufacturers are
storage capacity; price per unit and price per gigabyte; storage/retrieval access times; data transfer rates; product
quality and reliability; production volume capability; form factor; responsiveness to customer preferences and
demands; warranty; and brand.
We believe that our disc drive products are competitive with respect to each of these factors in the markets that
we currently address. We summarize below our principal disc drive competitors, other competitors, the effect of
competition on price erosion for our products and product life cycles and technology.
Principal Disc Drive Competitors. We have experienced and expect to continue to experience intense
competition from a number of domestic and foreign companies, some of which have greater financial and other
resources than we have. These competitors include independent disc drive manufacturers such as Western Digital, as
well as large captive manufacturers such as Fujitsu, Samsung, Hitachi, and Toshiba. Because they produce complete
computer systems and other non-compute consumer electronics and mobile devices, these “captive manufacturers”
can derive a greater portion of their operating margins from other components, which reduces their need to realize a
profit on the disc drives included in their computer systems and allows them to sell disc drives to third parties at very
low margins. Many captive manufacturers are also formidable competitors because they have more substantial
resources and greater access to their internal customers than we do. In addition, Hitachi (together with affiliated
entities), Toshiba and Samsung, each are increasingly integrating other storage technologies such as flash memory,
hybrid disc drives and SSDs into its product offerings. Not only may they be willing to sell their disc drives at a
lower margin to advance their overall business strategy, their portfolio allows them to be indifferent to which
technology prevails over the other. They can offer a broad range of storage media and solutions and focus on those
with lowest costs and greatest sales. In connection with our branded storage products, in addition to competing with
our disc drive competitors, we also compete with companies such as LaCie S.A. that purchase disc drives for use in
their branded storage products from us and our competitors.
Other Competitors. We also are experiencing competition from companies that provide alternative storage
technologies such as flash memory, which have substantially replaced disc drives in lower capacity handheld
devices. Principal competitors include Samsung, Hitachi, Micron and SanDisk.
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