Seagate 2006 Annual Report Download - page 41

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Table of Contents
We believe that for some of the fastest growing applications described above, the demand is focused on higher
capacity disc drive products.
38
greater opportunities for the sale of high-performance, high capacity disc drives. Many enterprises are also
consolidating data centers, aiming to increase speed and reliability within a smaller space, reduce network
complexity and increase energy savings. This has led to an increased demand for more energy efficient, small
form factor disc drives. Recently, solid state drive (SSDs) storage application that uses flash storage
technology as an alternative to disc drive storage technology, has been introduced as a potential alternative to
redundant system startup or boot disc drives.
In addition to the growth in mission critical enterprise storage, there has also been significant growth in the
use of high capacity, enterprise class serial advanced technology architecture (SATA) products in business
critical storage systems used by enterprises to store and access capacity-intensive non-critical data. This
application is exemplified by growth in content aggregation and distribution by companies like Google Inc.,
Yahoo! Inc. and News Corp as well as storage service providers. We believe that this growth in demand for
disc drives for use in business critical storage systems is likely to shift some demand from disc drives used in
traditional mission critical enterprise storage in the longer term.
• The mobile computing market is expected to grow faster than that for desktop computers as price and
performance continue to improve. Notebooks are increasingly replacing desktop computers and are
progressively more desirable to consumers as the need for mobility increases and wireless adoption continues
to advance. We estimate that in fiscal year 2007, industry shipments of disc drives for mobile compute
applications grew approximately 35% from fiscal year 2006.
The disc drive industry has recently introduced new hybrid disc drives that add flash memory to a disc drive
to provide customers with a single, integrated solution with enhanced performance, better power utilization,
quicker start-up speed and prolonged disc drive durability. Certain companies have also recently introduced
SSDs for the mobile compute applications that directly compete with mobile disc drives. The current cost per
gigabyte for SSDs is significantly higher than the cost per gigabyte for disc drives and is projected to remain
higher for the foreseeable future, which we believe will largely inhibit the use of SSDs in many price-
sensitive
mass
-
market mobile compute applications.
• While we believe growth in disc drives for desktop computing has recently moderated, in part due to the shift
from desktop computers to notebook computers, particularly in developed countries. We believe that current
growth in demand for disc drives in desktop computing is concentrated in developing markets where price
remains a primary consideration in compute application data storage purchases.
• Disc drives in the consumer electronics markets are primarily for use in DVRs and gaming consoles which
require more storage capability than can be provided in a cost-effective manner with alternative technologies
such as flash memory, which are better suited to lower capacity consumer electronics applications. We believe
the demand for disc drives in consumer electronics will become more pronounced with the increased amount
of high definition content that requires larger amounts of storage capacity. With respect to handheld
applications, we believe disc drive products smaller than 1.8-inch form factors have to a large extent been
replaced by competing storage technologies, such as solid state or flash memory. However, we believe that
disc drives continue to be well suited in applications requiring capacities of 20 gigabytes or more, and that the
demand for disc drives as additional storage to store, hold or back up related media content from such
handheld devices, continues to grow.
• We believe that industry demand for storage products is increasing due to the proliferation of media-rich
digital content in consumer applications and is fuelling increased consumer demand for storage. This has led
to the expansion of solutions such as external storage products to provide additional storage capacity and to
secure data in case of disaster or system failure, or to provide independent storage solutions for multiple users
in home or small business environments.