Seagate 2011 Annual Report Download - page 16

Table of Contents
Principal Disk Drive Competitors. We have experienced and expect to continue to experience intense competition from other disk drive
manufacturers. After the industry consolidation experienced during fiscal year 2012, in which we acquired certain assets that comprised the
HDD business of Samsung Electronics Co. Ltd. and Western Digital Corporation acquired Viviti Technologies Ltd. (formerly Hitachi Global
Storage Technologies). Our primary competitors are Western Digital Corporation and Toshiba Corporation.
Other Competitors. We also are experiencing competition from companies that provide alternative storage technologies such as flash
memory and SSDs used both in lower capacity hand held devices and for rapid processing and high volume transactions.
Price Erosion. Our industry has been characterized by price declines for disk drive products with comparable capacity, performance and
feature sets ("like-for-like products"). Price declines for like-for-like products ("price erosion") are more pronounced during periods of:
• economic contraction or industry consolidation in which competitors may use discounted pricing to attempt to maintain or gain
market share;
•
few new product introductions when competitors have comparable or alternative product offerings; and
• industry supply exceeding demand.
Disk drive manufacturers typically attempt to offset price erosion with an improved mix of disk drive products characterized by higher
capacity, better performance and additional feature sets and/or product cost reductions.
Product Life Cycles and Changing Technology. Success in our industry has been dependent to a large extent on the ability to be the first-
to-market with new products to market in high volume, with quality attributes that our customers expect, before our competitors, generally
allowing those disk drive manufacturers who introduce new products first to benefit from improved product mix, favorable profit margins and
less pricing pressure until comparable products are introduced. Also, because our industry is characterized by continuous price erosion, being
first-to-market has necessitated quick achievement of product cost effectiveness. Changing technology also necessitates on-going investments in
research and development, which may be difficult to recover due to rapid product life cycles and economic declines. Further, there is a continued
need to successfully execute product transitions and new product introductions, as factors such as quality, reliability and manufacturing yields
become of increasing competitive importance.
Disk Drive Industry Consolidation. Due to the significant challenges posed by the need to continually innovate and improve
manufacturing efficiency and the continued demands on capital and research and development investments required to do so, the disk drive
industry has undergone significant consolidation as disk drive manufacturers and component manufacturers merged with other companies or
exited the industry. We acquired Samsung Electronics Co., Ltd's hard disk drive business in December of 2011, and Western Digital purchased
Viviti Technologies Ltd. (formerly Hitachi Global Storage Technologies) in March of 2012. Additionally, we may in the future face indirect
competition from customers who from time to time evaluate whether to offer electronic data storage products that may compete with our
products.
Seasonality
The disk drive industry traditionally experiences seasonal variability in demand with higher levels of demand in the second half of the
calendar year. This seasonality is 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. In addition, corporate demand is typically higher during the second half of the calendar year.
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