Seagate 2012 Annual Report Download - page 21

Table of Contents
ITEM 1A. RISK FACTORS
Risks Related to our Business
Macroeconomic Conditions
—Changes in the macroeconomic environment have, and may continue to, negatively impact our results of
operations.
Due to the continuing uncertainty about current macroeconomic conditions affecting consumer and enterprise spending, we believe our
customers may postpone spending in response to tighter credit, unemployment, negative financial news and/or declines in income or asset
values, which could have a material adverse effect on the demand for our products. Continuing high unemployment rates, low levels of
consumer liquidity, risk of default on sovereign debt and volatility in credit and equity markets have weakened consumer confidence and
decreased consumer and enterprise spending in many regions around the world. Other factors that could influence demand include conditions in
the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic
factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for our
products and on our financial condition and operating results.
Competition—Our industry is highly competitive and our products have experienced and may continue to experience significant price
erosion and market share variability.
The disk drive industry is intensely competitive and vendors have typically experienced substantial price erosion over the life of a product.
Our competitors have historically offered existing products at lower prices as part of a strategy to gain or retain market share and customers.
Should these practices continue, we may need to continually reduce our prices for existing products to retain our market share, which could
adversely affect our results of operations.
While recent slowing areal density improvements and longer product lifecycles have necessitated that hard drive manufacturers reduce
engagement in aggressive pricing tactics that have historically led to increased price erosion, we believe that industry price erosion and market
share may remain volatile should the industry engage in aggressive pricing actions targeted to shift customer demand.
Sales to distributors that serve producers of non-branded products in the personal storage sector may also contribute to increased price
erosion. These customers generally have limited product qualification programs, which increases the number of competing products available to
satisfy their demand. As a result, purchasing decisions for these customers are based largely on price and terms. Any increase in our average
price erosion would have an adverse effect on our results of operations.
Additionally, a significant portion of our success in the past has been a result of increasing our market share at the expense of our
competitors, particularly in enterprise markets. Market share for our products can be negatively affected by our customers' diversifying their
sources of supply as our competitors enter the market for particular products, as well as by our ability to ramp volume production of new product
offerings. When our competitors successfully introduce product offerings that are competitive with our recently introduced products, our
customers may quickly diversify their sources of supply. Any significant decline in our market share in any of our principal market applications
would adversely affect our results of operations.
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
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