Seagate 2007 Annual Report Download - page 16

Table of Contents
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, Toshiba,
Micron, SanDisk and Intel.
Price Erosion. Our industry has been characterized by continuous price erosion for disc drive products with comparable capacity,
performance and feature sets (i.e., “like-for-like products”). Price erosion for like-for-like products (“price erosion”) is more pronounced during
periods of:
• industry consolidation in which competitors aggressively use discounted price to gain market share;
• few new product introductions when multiple competitors have comparable or alternative product offerings;
•
temporary imbalances between industry supply and demand; and
Disc drive manufacturers typically attempt to offset price erosion with an improved mix of disc drive products characterized by higher
capacity, better performance and additional feature sets and/or product cost reductions.
We expect price erosion in our industry will continue for the foreseeable future. To remain competitive, we believe it will be necessary to
continue to reduce prices as well as introduce new product offerings that utilize advanced technologies ahead of our competitors in order to take
advantage of potentially higher initial profit margins and reduced cost structure on these new products.
Product Life Cycles and Changing Technology. Our industry has been characterized by significant advances in technology, which have
contributed to rapid product life cycles. As a result, success in our industry has been dependent to a large extent on the ability to be the first-to-
market with new products, allowing those disc drive manufacturers who introduce new products first to sell those products at a premium until
comparable products are introduced. Also, because our industry is characterized by continuous price erosion, the existence of rapid product life
cycles has necessitated the need to quickly achieve product cost effectiveness. Changing technology also necessitates the need for on-going
investments in research and development, which may be difficult to recover due to rapid product life cycles. Further, there is a continued need to
successfully execute product transitions and new product introductions, as factors such as quality, reliability and manufacturing yields become of
increasing competitive importance. We believe that our future success will depend upon our ability to rapidly develop, manufacture and market
products of high quality and reliability on a cost-effective basis. Introduction of any technology that delivers storage at an attractive price, or has
other features not offered by disc drives, may be disruptive to the disc drive industry.
Seasonality
• seasonally weaker demand which may cause excess supply.
The disc drive industry traditionally experiences seasonal variability in demand with higher levels of demand in the second half of the
calendar year. This seasonality is driven by consumer spending in the back-to-school season from late summer to fall and the traditional holiday
shopping season from fall to winter. In addition, corporate demand is typically higher during the second half of the calendar year when IT budget
calendars provide for more spending.
Research and Development
We are committed to developing new component technologies, products and alternative storage technologies, including solid state
technology. Our research and development focus is designed to bring new products to market in high volume, with quality attributes that our
customers expect, before our competitors. Part of our product development strategy is to leverage a common platform and subsystem within
product families to serve different market needs. This platform strategy allows for more efficient resource utilization, reduces
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