Seagate 2007 Annual Report Download - page 22

Table of Contents
ITEM 1A.
RISK FACTORS
Risks Related to Our Business
Competition
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Our industry is highly competitive and our products have experienced and will continue to experience significant price
erosion and market share variability.
Even during periods when demand is strong, the disc drive industry is intensely competitive and vendors typically experience substantial
price erosion over the life of a product. Our competitors have historically offered existing products at lower prices as part of a strategy to gain or
retain market share and customers, and we expect these practices to continue. We will need to continually reduce our prices to retain our market
share, which could adversely affect our results of operations.
We believe this basic industry condition of continuing price erosion and market share variability will continue, as our competitors engage
in aggressive pricing actions targeted to encourage shifting of customer demand. The pricing environment in the fourth fiscal quarter of 2008
was substantially as we had initially expected, and we expect continuous price erosion for fiscal year 2009 as our competitors continue these
efforts.
Our ability to offset the effect of price erosion through new product introductions at higher average prices is diminished to the extent
competitors introduce products into particular markets ahead of our similar, competing products. Our ability to offset the effect of price erosion
is also diminished during times when product life cycles for particular products are extended, allowing competitors more time to enter the
market. The growth of sales to distributors that serve producers of non-branded products in the personal storage sector may also contribute to
increased price erosion. These customers generally have limited product qualification programs, which increases the number of competing
products available to satisfy their demand. As a result, purchasing decisions for these customers are based largely on price and terms. Any
increase in our average price erosion would have an adverse effect on our result of operations.
Additionally, a significant portion of our success in the past has been a result of increasing our market share at the expense of our
competitors, particularly in the notebook and small form factor enterprise markets. Market share for our products can be negatively affected by
our customers’ diversifying their sources of supply as our competitors enter the market for particular products, as well as by our ability to ramp
volume production of new product offerings. When our competitors successfully introduce product offerings, which are competitive with our
recently introduced products, our customers may quickly diversify their sources of supply. Any significant decline in our market share in any of
our principal market applications would adversely affect our results of operations.
Principal Competitors—We compete with both independent manufacturers, whose primary focus is producing technologically
advanced disc drives, and captive manufacturers, who do not depend solely on sales of disc drives to maintain their profitability.
We have experienced and expect to continue to experience intense competition from a number of domestic and foreign companies,
including other independent disc drive manufacturers and large captive manufacturers such as:
The term “independent” in this context refers to manufacturers that primarily produce disc drives as a stand-alone product, and the term
“captive” refers to disc drive manufacturers who themselves or through affiliated
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Independent Manufacturers
Captive Manufacturers
Western Digital Corporation
Fujitsu Limited
GS Magicstor Inc.
Hitachi Global Storage Technologies
Samsung Electronics Incorporated
Toshiba Corporation