Seagate 2006 Annual Report Download - page 21

Table of Contents
Hitachi (together with affiliated entities) also sell other products to our customers, including critical components like
flash memory, ASICs and flat panel displays, and may be willing to sell their disc drives at a lower margin to
advance their overall business strategy. This may improve their ability to compete with us. To the extent we are not
successful competing with captive or independent disc drive manufacturers, our results of operations will be
adversely affected.
In addition, in response to customer demand for high-quality, high-volume and low-cost disc drives,
manufacturers of disc drives have had to develop large, in some cases global, production facilities with highly
developed technological capabilities and internal controls. The development of large production facilities and
industry consolidation can contribute to the intensification of competition. We also face indirect competition from
present and potential customers who evaluate from time to time whether to manufacture their own disc drives or
other information storage products.
We have also experienced competition from other companies that produce alternative storage technologies like
flash memory, where increased capacity, improving cost, lower power consumption and performance ruggedness
have resulted in competition with our lower capacity, smaller form factor disc drives in handheld applications. While
this competition has traditionally been in the markets for handheld consumer electronics applications like personal
media players, these competitors have recently announced SSD products for notebook and enterprise compute
applications. Some of these companies, like Samsung, also sell disc drives.
Volatility of Quarterly Results — Our quarterly operating results fluctuate significantly from period to period,
and this may cause our shares prices to decline.
In the past, our quarterly revenue and operating results have fluctuated significantly from period to period. We
expect this fluctuation to continue for a variety of reasons, including:
As a result, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be
meaningful, and that these comparisons may not be an accurate indicator of our future performance. Our operating
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• competitive pressures resulting in lower selling prices by our competitors targeted to encourage shifting of
customer demand;
• delays or problems in the introduction of our new products, particularly new disc drives with lower cost
structures due to inability to achieve high production yields, delays in customer qualification or initial product
quality issues;
•
changes in purchasing patterns by our distributor customers;
•
increased costs or adverse changes in availability of supplies of raw materials or components;
•
the impact of corporate restructuring activities that we may engage in;
• changes in the demand for the computer systems, storage subsystems and consumer electronics that contain
our disc drives, due to seasonality and other factors;
•
changes in purchases from period to period by our primary customers, particularly, as our competitors are able
to introduce and produce in volume competing disc drive solutions or alternative storage technology solutions,
such as flash memory or SSDs;
• shifting trends in customer demand which, when combined with overproduction of particular products,
particularly at times such as the present time when the industry is served by multiple suppliers, results in
supply/demand imbalances;
• adverse changes in the level of economic activity in the United States and other major regions in which we do
business;
•
our high proportion of fixed costs, including research and development expenses; and
•
announcements of new products, services or technological innovations by us or our competitors.