Seagate 2010 Annual Report Download - page 24

Table of Contents
We cannot assure that we will be among the leaders in time-to-market with new products or that we will be able to successfully qualify new
products with our customers in the future.
If we cannot successfully deliver competitive products, our future results of operations may be adversely affected.
Smaller Form Factor Disk Drives
—If we do not continue to successfully market smaller form factor disk drives, our business may suffer.
The disk drive industry is experiencing significant increases in sales of smaller form factor disk drives for an expanding number of
applications, in particular notebook computers and consumer electronic devices, but also in personal computers and enterprise storage
applications. Our future success will depend on our ability to develop and introduce smaller form factor drives at desired price and capacity
points faster than our competitors.
We have experienced competition from other companies that produce alternative storage technologies like solid state or flash memory,
where increased capacity, improving cost, energy efficiency and performance ruggedness have resulted in flash memory largely replacing disk
drives in handheld applications. We believe that the demand for disk drives to store or back up related media content from such handheld
devices, however, continues to grow. While this competition has traditionally been limited to the markets for handheld consumer electronics
applications, these competitors have announced SSDs for tablet, notebook and enterprise compute applications.
If we do not suitably adapt our product offerings to successfully introduce additional smaller form factor disk drives or alternative storage
products based on flash storage technology, or if our competitors are successful in achieving customer acceptance of SSD products for tablet,
notebook and enterprise compute applications, then our customers may decrease the amounts of our products that they purchase, which would
adversely affect our results of operations.
Difficulty in Predicting Quarterly Demand
—If we fail to predict demand accurately for our products in any quarter, we may not be able to
recapture the cost of our investments.
The disk drive industry operates on quarterly purchasing cycles, with much of the order flow in any given quarter typically coming at the
end of that quarter. Our manufacturing process requires us to make significant product-specific investments in inventory in each quarter for that
quarter's production. Since we typically receive the bulk of our orders late in a quarter after we have made our investments, there is a risk that
our orders will not be sufficient to allow us to recapture the costs of our investment before the products resulting from that investment have
become obsolete. We cannot assure you that we will be able to accurately predict demand in the future.
The difficulty in forecasting demand also increases the difficulty in anticipating our inventory requirements, which may cause us to over-
produce finished goods, resulting in inventory write-offs, or under-produce finished goods, affecting our ability to meet customer requirements.
Additionally, the risk of inventory write-offs could increase if we were to continue to hold higher inventory levels. We cannot be certain that we
will be able to recover the costs associated with increased inventory.
Other factors that may negatively impact our ability to recapture the cost of investments in any given quarter include:
•
the impact of variable demand and an aggressive pricing environment for disk drives;
• the impact of competitive product announcements and possible excess industry supply both with respect to particular disk drive
products and with respect to competing alternative storage technology solutions such as SSDs in tablet, notebook and enterprise
compute applications;
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