Seagate 2008 Annual Report Download - page 28

Table of Contents
Dependence on Distributors
—We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of
our sales.
A substantial portion of our sales has been to distributors of desktop disk drive products. Certain of our distributors may also market other
products that compete with our products. Product qualification programs in this distribution channel are limited, which increases the number of
competing products that are available to satisfy demand, particularly in times of lengthening product cycles. As a result, purchasing decisions in
this channel are based largely on price, terms and product availability. Sales volumes through this channel are also less predictable and subject to
greater volatility than sales to our OEM customers. In addition, the recent deterioration in business and economic conditions may exacerbate
price erosion and volatility as distributors lower prices to compensate for lower demand and higher inventory levels. Our distributors ability to
access credit for purposes of funding their operations may also affect purchases of our products by these customers.
If distributors reduce their purchases of our products or prices decline significantly in the distribution channel or if distributors experience
financial difficulties or terminate their relationships with us, our revenues and results of operations would be adversely affected.
Dependence on Sales of Disk Drives in Consumer Electronics Applications
—Our sales of disk drives for consumer electronics applications,
which have contributed significant revenues to our results, can experience significant volatility due to seasonal and other factors, which
could materially adversely impact our future results of operations.
Sales of disk drives for consumer electronics applications have contributed significant revenues to our results. Consumer spending on
consumer electronics has however, and may continue to, deteriorate significantly in many countries and regions, including the United States, due
to the poor global economic conditions and increasing levels of unemployment. For example, factors that could influence the levels of consumer
spending on consumer electronic products include volatility in fuel and other energy costs, conditions in the residential real estate and mortgage
markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending
behavior. These and other economic factors could have a material adverse effect on demand for our products and services and on our financial
condition and results of operations.
In addition, the demand for consumer electronics products can be even more volatile and unpredictable than the demand for compute
products. In some cases, our products manufactured for consumer electronics applications are uniquely configured for a single customer's
application, which creates a risk of unwanted and unsellable inventory if the anticipated volumes are not realized. This potential for
unpredictable volatility is increased by the possibility of competing alternative storage technologies like flash memory meeting the customers'
cost and capacity metrics, resulting in a rapid shift in demand from our products and disk drive technology, generally, to alternative storage
technologies. Unpredictable fluctuations in demand for our products or rapid shifts in demand from our products to alternative storage
technologies in new consumer electronics applications could materially adversely impact our future results of operations.
Dependence on Sales of Disk Drives Directly to Consumers Through Retail Outlets
—Our sales of disk drives directly to consumers through
retail outlets can experience significant volatility due to seasonal and other factors, which could materially adversely impact our future
results of operations.
We believe that industry demand for storage products in the long-term 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. Consumer spending on such retail sales of our branded solutions has
deteriorated in some markets and may continue
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