Seagate 2007 Annual Report Download - page 48

Table of Contents
Operating Performance
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Revenue
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Revenue in fiscal year 2008 rose to approximately $12.7 billion, driven by growth in the number of units shipped as a
result of the continued growth in digital content and the resulting increase in demand for storage and customer acceptance of our new
products. The increase in the number of units shipped and an improved mix of products shipped was partially offset by price erosion,
which was relatively benign during the first half of the fiscal year as a result of favorable industry conditions, including well-balanced
disc drive supply and demand, while being more pronounced during the second half of fiscal year 2008, as is consistent with historical
seasonal patterns.
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Enterprise
—During fiscal year 2008, we believe we extended our leadership position in the enterprise market, shipping 20.3 million
units, an increase of 22% from 16.7 million units in fiscal year 2007. The increase in the number of units shipped was primarily
attributable to an increase in market demand for mission critical enterprise disc drives as server virtualization resulted in increased
demand for 3.5-inch high-speed, high-capacity products in server-attached storage applications. Additionally, our sales of small form
factor mission critical enterprise disc drives increased 80% to 7.2 million units as compared to fiscal year 2007. Our increased
shipments resulted in our market share growth, which combined with an improved product mix, was partially offset by price erosion.
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Mobile
—In fiscal year 2008, we believe the overall mobile compute market grew approximately 45% from fiscal year 2007, with
Seagate shipping 26.7 million units, an increase of 38% over fiscal year 2007. The increase in unit shipments from the prior fiscal year
was driven by what we believe to be a continuing trend of notebooks systems increasingly becoming the preference for both
consumers and enterprises as the need for mobility increases and wireless adoption continues to advance. Also, we saw an increase in
the use of our mobile products in branded storage products. Our slower than market growth was mainly attributable to delayed product
introductions allowing our competitors to capture additional market share during the year. In addition, the storage capacities for our
mobile compute disc drive shipments are trending higher as notebooks are increasingly displacing desktop computers in the home.
These increases in units shipped and a favorable product mix were offset by particularly pronounced price erosion.
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Desktop
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In fiscal year 2008, we believe we maintained our market leadership position with shipments of 111 million units, an
increase of 13% over fiscal year 2007. This increase was mainly driven by increased demand for our desktop products, particularly in
our higher capacities for 3.5-inch desktop products. We believe this demand is driven by 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. This increase in demand and favorable product mix was offset by price erosion. In the global distribution channel, we exited
the June 2008 quarter with distribution channel inventory for desktop products at approximately four weeks.
Other factors affecting income —In fiscal year 2008, our operating results included an expense of $262 million related to variable
performance-based compensation, as compared to none in fiscal year 2007. During fiscal year 2008, we recorded restructuring costs of
approximately $50 million related to the closure of our Limavady, Northern Ireland operations and approximately $19 million related to the
closure of our Milpitas, California operations.
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Consumer
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In fiscal year 2008, we shipped a total of 24.6 million units in the CE market, a decrease of 3% from fiscal year 2007.
This decrease was mainly attributable to a decrease of 36% in gaming units shipped compared to fiscal year 2007, only partially offset
by a 33% increase in DVR shipments. We believe that increased penetration of DVRs in the home has resulted in incremental demand
for disc drives for these applications. We believe the decreased demand for disc drives used in gaming applications has been due in
part to some new gaming platforms not utilizing a disc drive and our decision to reduce participation in this market.