Seagate 2009 Annual Report Download - page 28

Table of Contents
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, deterioration in business and economic conditions could 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 Client Non
-Compute Applications—Our sales of disk drives for client non-compute 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 client non-compute applications have contributed significant revenues to our results. Consumer spending on client
non-compute has however, and may continue to, deteriorate significantly in many countries and regions, including the United States, due to poor
global economic conditions and increasing levels of unemployment. This 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 client non-compute products can be even more volatile and unpredictable than the demand for client compute
products. In some cases, our products manufactured for client non-compute 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 client non-compute 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 retail sales of our branded solutions has deteriorated
in some markets and may continue to do so if poor global economic conditions continue and higher levels of unemployment persist. This could
have a material adverse effect on demand for our products and services and on our financial condition and results of operations.
In addition, such retail sales of our branded solutions traditionally experience seasonal variability in demand with higher levels of demand
in the first half of our fiscal year 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. Additionally, our ability to reach such consumers depends on our maintaining effective working
relationships with major retailers and distributors. Failure to anticipate consumer demand for our branded
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