Seagate 2006 Annual Report Download - page 43

Table of Contents
integrated design and manufacturing approach, have allowed us to effectively leverage our leadership in traditional
computing to enter new markets with only incremental product development and manufacturing costs.
Maxtor acquisition
During fiscal year 2007, we completed our integration of Maxtor, including customer and product transitions
where we replaced Maxtor designed disc drive products with Seagate designed disc drive products, allowing us to
improve our capacity utilization and further lower our cost structure. We achieved our goals of retaining a substantial
portion of the market share held by Maxtor prior to the acquisition. We also continued to advance what we believe to
be our technology and cost leadership positions, maintaining our position in key markets and introducing new
products in core markets while developing additional value streams in new and emerging markets.
Our fiscal year 2007 included Maxtor’
s operating losses largely recognized during the first half of the fiscal year
as we transitioned Maxtor products to Seagate products and acquisition and integration related charges recognized
over the entire fiscal year. Although we substantially completed the Maxtor restructuring and integration activities
during the December 2006 quarter, certain operating expenses and acquisition related charges continued during the
last half of the fiscal year, the most significant of which related to the amortization of acquired intangible assets. We
expect to continue to incur charges, the most significant of which are expected to be the amortization of acquired
intangible assets.
Operating performance
40
•
Revenue
— Revenue in fiscal year 2007 was approximately $11.4 billion, an increase of 23% over fiscal year
2006, mainly from an increase of 34% in the number of disc drives shipped as a result of the retention of a
portion of Maxtor’s market share, but also due to continued growth in digital content and the resulting
increase in demand for storage and growth in the mobile market, coupled with customer acceptance of our
new products, including growth in branded storage products shipped to retail customers. The increase in the
number of units shipped was off-set by price erosion which was particularly pronounced in the first half of
fiscal year 2007 in the desktop and mobile markets, in part as market share gains became the primary focus of
a number of our competitors after our acquisition of Maxtor in late fiscal year 2006, as well as during the last
half of the fiscal year, where the pricing environment for high capacity 3.5-inch ATA disc drives was more
aggressive than we anticipated and where price erosion in the mobile market continued to be aggressive.
•
Enterprise
— We believe we increased our leadership position in the enterprise market, shipping16.7 million
units during fiscal year 2007, an increase of 17% from 14.3 million units in fiscal year 2006. During the June
2007 quarter, we shipped 4.3 million disc drives, an increase of 2% from the year-ago quarter and an increase
of 3% from the immediately preceding quarter. Increases in unit shipments compared to the year-ago quarter
were driven by our retention of Maxtor market share and an accelerating trend in both the adoption of small
form factor products as well as high
-
capacity products for Internet infrastructure applications.
•
Mobile
—
In fiscal year 2007, we believe the overall mobile compute market grew 35% from fiscal year 2006,
with Seagate shipping 19.4 million units, an increase of 56% over fiscal year 2006. During the June 2007
quarter, we shipped 6.1 million disc drives, an increase of 80% from the year-ago quarter and an increase of
30% from the immediately preceding quarter. We believe our share of the mobile compute market increased
during the fiscal year and particularly during the June 2007 quarter, largely as a result of greater market access
through additional qualifications of our mobile compute products and use of our mobile products in branded
storage products. There was also a strong trend toward higher capacity products.
•
Desktop
— In fiscal year 2007, we believe we maintained our market leadership position with shipments of
97.8 million units, an increase of 33% over fiscal year 2006. During the June 2007 quarter, we shipped
23.8 million units, an increase of 19% from the year-ago quarter and essentially flat from the immediately
preceding quarter. The increase from the year-ago quarter was mainly driven by our retention of Maxtor
market share, the continued growth in digital content and the resulting increase in overall demand for desktop
storage products and the use of our desktop disc drives in our branded storage products. In the global