Seagate 2011 Annual Report Download - page 23

Table of Contents
Principal Competitors
—We compete with both an independent manufacturer, whose primary focus is producing technologically advanced
disk drives, and a captive manufacturer, who does not depend solely on sales of disk drives to maintain its profitability.
We have experienced and expect to continue to experience intense competition from an independent disk drive manufacturer, and a captive
manufacturer. The term "independent" in this context refers to manufacturers that primarily produce disk drives as a stand-
alone product, such as
Western Digital Corporation, and the term "captive" in this context refers to a manufacturer who through affiliated entities produces complete
computer or other systems that contain disk drives or other electronic data storage products, such as Toshiba Corporation.
The captive manufacturer is a formidable competitor because it has the ability to determine pricing for complete systems without regard to
the margins on individual components. As components other than disk drives generally contribute a greater portion of the operating margin on a
complete computer system than do disk drives, the captive manufacturer does not necessarily need to realize a profit on the disk drives included
in a complete computer system and, as a result, may be willing to sell disk drives to third parties at very low margins. The captive manufacturer
is also a formidable competitor because it has more substantial resources than we do. To the extent we are not successful competing with the
captive or independent disk drive manufacturers, our results of operations will be adversely affected.
In response to customer demand for high-quality, high-volume and low-cost disk drives, manufacturers of disk drives have had to develop
large, and in some cases global, production facilities with highly developed technological capabilities and internal controls. The development of
these large production facilities combined with industry consolidation can further increase the intensity of competition.
We also face indirect competition from present and potential customers who evaluate from time to time whether to manufacture their own
disk drives or other electronic data storage products.
We also experience competition from other companies that produce alternative storage technologies like flash memory, where increasing
capacity, decreasing cost, energy efficiency and improvements in performance ruggedness have resulted in competition with our lower capacity,
smaller form factor disk drives. While this competition has traditionally been in the markets for handheld consumer electronics applications,
these competitors have announced solid state drives (SSDs) for tablet, notebook and enterprise compute applications. Certain customers for both
notebook and enterprise compute applications are evaluating and may adopt SSDs as alternatives to hard drives in certain applications.
Volatility of Quarterly Results—Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause
our share price to decline.
In the past, our quarterly revenue and results of operations have fluctuated, sometimes significantly, from period to period. These
fluctuations, which we expect to continue, may be occasioned by a variety of factors, including:
•
current uncertainty in global economic conditions may pose a risk to the overall economy;
•
adverse changes in the level of economic activity in the major regions in which we do business;
• competitive pressures resulting in lower selling prices by our competitors targeted to encourage shifting of customer demand;
• delays or problems in our introduction of new products, particularly new disk drives with lower cost structures, the inability to
achieve high production yields or delays in customer qualification or initial product quality issues;
•
changes in purchasing patterns by our distributor customers;
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