Seagate 2013 Annual Report Download - page 26

Table of Contents
distributors lower prices to compensate for lower demand and higher inventory levels. Our distributors' ability to access credit for purposes of
funding their operations may also affect purchases of our products by these customers.
If distributors reduce their purchases of our products or prices decline significantly in the distribution channel or if distributors experience
financial difficulties or terminate their relationships with us, our revenues and results of operations would be adversely affected.
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 our branded 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.
We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more of our larger customers.
Some of our key customers account for a large portion of our disk drive revenue. While we have longstanding relationships with many of
our customers, if any of our key customers were to significantly reduce their purchases from us, our results of operations would be adversely
affected. While sales to major customers may vary from period to period, a major customer that permanently discontinues or significantly
reduces its relationship with us could be difficult to replace. In line with industry practice, new customers usually require that we pass a lengthy
and rigorous qualification process at the customer's cost. Accordingly, it may be difficult or costly for us to attract new major customers.
Additionally, mergers, acquisitions, consolidations or other significant transactions involving our customers generally entail risks to our
business. If a significant transaction involving any of our key customers results in the loss of or reduction in purchases by these key customers, it
could have a materially adverse effect on our business, results of operations, financial condition and prospects.
We have a long and unpredictable sales cycle for enterprise data storage solutions.
Our enterprise data storage solutions are technically complex and we typically supply them in high quantities to a small number of
customers. Many of our products are also tailored to meet the specific requirements of individual customers, and are often integrated by our
customers into the systems and products that they sell. Factors that affect the length of our sales cycle include:
• the time required for testing and evaluating our products before they are deployed;
• the size of the deployment; and
• the degree of system configuration necessary to deploy our products.
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