Seagate 2012 Annual Report Download - page 28

Table of Contents
of unwanted and unsellable inventory if the anticipated volumes are not realized. This potential for unpredictable volatility is increased by the
possibility of competing alternative storage technologies like flash memory meeting the customers' cost and capacity metrics, resulting in a rapid
shift in demand from our products and disk drive technology, generally, to alternative storage technologies. Unpredictable fluctuations in
demand for our products or rapid shifts in demand from our products to alternative storage technologies in new client non-compute applications
could materially adversely impact our future results of operations.
Dependence on Sales of Disk Drives Directly to Consumers Through Retail Outlets
—Our sales of disk drives directly to consumers through
retail outlets can experience significant volatility due to seasonal and other factors, which could materially adversely impact our future
results of operations.
We believe that industry demand for storage products in the long-term is increasing due to the proliferation of media-rich digital content in
consumer applications and is fueling increased consumer demand for storage. This has led to the expansion of solutions such as external storage
products to provide additional storage capacity and to secure data in case of disaster or system failure, or to provide independent storage
solutions for multiple users in home or small business environments. Consumer spending on retail sales of our branded solutions has deteriorated
in some markets and may continue to do so if poor global economic conditions continue and higher levels of unemployment persist. This could
have a material adverse effect on demand for our products and services and on our financial condition and results of operations.
In addition, such retail sales of our branded solutions traditionally experience seasonal variability in demand with higher levels of demand
in the first half of our fiscal year 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. Additionally, our ability to reach such consumers depends on our maintaining effective working
relationships with major retailers and distributors. Failure to anticipate consumer demand for our branded solutions as well as an inability to
maintain effective working relationships with retail and online distributors may adversely impact our future results of operations.
Importance of Controlling Operating Costs
—If we do not control our operating expenses, we will not be able to compete effectively in our
industry.
Our strategy involves, to a substantial degree, increasing revenue and product volume while at the same time controlling operating
expenses. If we do not control our operating expenses, our ability to compete in the marketplace may be impaired. In the past, activities to reduce
operating costs have included closures and transfers of facilities, significant personnel reductions and efforts to increase automation. The
reduction of personnel and closure of facilities may adversely affect our ability to manufacture our products in required volumes to meet
customer demand and may result in other disruptions that affect our products and customer service.
Impairment Charges
—We may be required to record impairment charges for goodwill and/or other long-lived assets.
We are required to assess goodwill annually for impairment, or on an interim basis whenever events occur or circumstances change, such as
an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value of a reporting unit
below its carrying amount. We are also required to test other long-lived assets, including acquired intangible assets and property, equipment and
leasehold improvements, for recoverability and impairment whenever there are indicators of impairment, such as an adverse change in business
climate.
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