Seagate 2012 Annual Report Download - page 48

Table of Contents
• Contractual Obligations and Off-Balance-Sheet Arrangements. Overview of contractual obligations and contingent liabilities
and commitments outstanding as of June 28, 2013 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 and cost effectiveness.
We produce a broad range of electronic data storage products including HDDs, solid state hybrid drives (SSHD) and solid state drives
(SSD), which address 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 data storage products, 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 had substantially
recovered as of the end of fiscal year 2012. During fiscal year 2013, price erosion has been relatively benign.
Demand Trends for Disk Drives
We believe that continued growth in digital content requires increasingly higher storage capacity in order to store, aggregate, host,
distribute, manage, backup and use such content. We also believe that as architectures evolve to serve the growing commercial and consumer
user base throughout the world, the manner which hard drives are delivered to market and utilized by our customers will evolve as well.
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