Seagate 2011 Annual Report Download - page 50

Table of Contents
• Results of Operations. Analysis of our financial results comparing fiscal years 2012 to 2011 and comparing fiscal years 2011 to
2010.
• Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows, and discussion of our financial
condition including the credit quality of our investment portfolio and potential sources of liquidity.
•
Contractual Obligations and Off
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Balance
-
Sheet Arrangements.
Overview of contractual obligations and contingent liabilities
and commitments outstanding as of June 29, 2012 and an explanation of off-balance-sheet arrangements.
• Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and
judgments incorporated in our reported financial results.
Our Company
We are a leading provider of electronic data storage products. Our principal products are hard disk drives, commonly referred to as disk
drives, hard drives or HDDs. Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk
drives continue to be the primary medium of mass data storage due to their performance attributes, high quality, cost effectiveness and energy
efficiencies.
We produce a broad range of electronic data storage products addressing enterprise applications, where our products are designed for
enterprise servers, mainframes and workstations; client compute applications, where our products are designed for desktop and notebook
computers; and client non-compute applications, where our products are designed for a wide variety of end user devices such as digital video
recorders (DVRs), gaming consoles, personal data backup systems, portable external storage systems and digital media systems. In addition to
manufacturing and selling disk drives, we provide data storage services for small- to medium-sized businesses, including online backup, data
protection and recovery solutions.
Business Overview
Our industry is characterized by several trends and factors that have a material impact on our strategic planning, financial condition and
results of operations.
Industry Supply Balance
From time to time the industry has experienced periods of imbalance between supply and demand. To the extent that the disk drive industry
builds capacity based on expectations of demand that do not materialize, price erosion may become more pronounced. Conversely, during
periods where demand exceeds supply, price erosion is generally muted.
In early October 2011, floodwaters north of Bangkok, Thailand inundated many manufacturing industrial parks that contained a number of
the factories supporting the HDD industry's supply chain. The HDD industry had concentrated a large portion of its supply chain participants
within these industrial parks in an effort to reduce cost and improve logistics. As a result, the inundation of floodwaters into these industrial
parks had caused the closure or suspension of production by a number of participants within the HDD supply chain.
During the supply chain disruption in fiscal year 2012, we believe demand exceeded supply due to the impact from the flooding in
Thailand, resulting in an increase in the average selling price ("ASP"). The industry's ability to manufacture and ship drives has continued to
recover through the end of the fiscal year and we believe total shipments in the industry were approximately 600 million units, compared to
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