Seagate 2014 Annual Report Download - page 27
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Thiscouldhaveamaterialadverseeffectondemandforourproductsandservicesandonourfinancialconditionandresultsofoperations.
Inaddition,suchretailsalesofourbrandedsolutionstraditionallyexperienceseasonalvariabilityindemandwithhigherlevelsofdemandinthefirsthalfof
ourfiscalyeardrivenbyconsumerspendingintheback-to-schoolseasonfromlatesummertofallandthetraditionalholidayshoppingseasonfromfalltowinter.
Additionally,ourabilitytoreachsuchconsumersdependsonourmaintainingeffectiveworkingrelationshipswithmajorretailersanddistributors.Failureto
anticipateconsumerdemandforourbrandedsolutionsaswellasaninabilitytomaintaineffectiveworkingrelationshipswithretailandonlinedistributorsmay
adverselyimpactourfutureresultsofoperations.
Wemaybeadverselyaffectedbythelossof,orreduced,delayedorcanceledpurchasesby,oneormoreofourlargercustomers.
Someofourkeycustomersaccountforalargeportionofourdiskdriverevenue.Whilewehavelongstandingrelationshipswithmanyofourcustomers,ifany
ofourkeycustomersweretosignificantlyreducetheirpurchasesfromus,ourresultsofoperationswouldbeadverselyaffected.Whilesalestomajorcustomers
mayvaryfromperiodtoperiod,amajorcustomerthatpermanentlydiscontinuesorsignificantlyreducesitsrelationshipwithuscouldbedifficulttoreplace.Inline
withindustrypractice,newcustomersusuallyrequirethatwepassalengthyandrigorousqualificationprocessatthecustomer'scost.Accordingly,itmaybe
difficultorcostlyforustoattractnewmajorcustomers.Additionally,mergers,acquisitions,consolidationsorothersignificanttransactionsinvolvingour
customersgenerallyentailriskstoourbusiness.Ifasignificanttransactioninvolvinganyofourkeycustomersresultsinthelossoforreductioninpurchasesby
thesekeycustomers,itcouldhaveamateriallyadverseeffectonourbusiness,resultsofoperations,financialconditionandprospects.
Ifweexperienceshortagesordelaysinthereceiptof,orcostincreasesin,criticalcomponents,equipmentorrawmaterialsnecessarytomanufactureour
products,wemaysufferloweroperatingmargins,productiondelaysandothermaterialadverseeffects.
Thecost,qualityandsupplyofcomponents,subassemblies,certainequipmentandrawmaterialsusedtomanufactureourproductsandkeycomponentslike
recordingmediaandheadsarecriticaltooursuccess.Theequipmentweusetomanufactureourproductsandcomponentsisfrequentlycustommadeandcomes
fromafewsuppliersandtheleadtimesrequiredtoobtainmanufacturingequipmentcanbesignificant.Particularlyimportantforourproductsincluderead/write
heads,aluminumorglasssubstratesforrecordingmedia,ASICs,spindlemotors,printedcircuitboards,andsuspensionassemblies.
Werelyonsolesuppliersoralimitednumberofsuppliersforsomeofthesecomponentsthatwedonotmanufacture,includingaluminumandglasssubstrates,
read/writeheads,ASICs,spindlemotors,printedcircuitboards,andsuspensionassemblies.Manyofsuchcomponentsuppliersaregeographicallyconcentrated,in
particular,inThailand,whichmakesoursupplychainmorevulnerabletoregionaldisruptionssuchastheseverefloodinginThailandinOctober2011,whichhada
materialimpactontheproductionandavailabilityofmanycomponents.Ifourvendorsforthesecomponentsareunabletomeetourcost,quality,andsupply
requirements,wecouldexperienceashortageinsupplyoranincreaseinproductioncosts,whichwouldadverselyaffectourresultsofoperations.
Certainrareearthelementsarecriticalinthemanufactureofourproducts.Wepurchasecomponentsthatcontainrareearthelementsfromanumberof
countries,includingthePeople'sRepublicofChina.Wecannotpredictwhetheranynationwillimposeregulations,quotasorembargoesupontherareearth
elementsincorporatedintoourproductsthatwouldrestricttheworldwidesupplyofsuchmetalsorincreasetheircost.Wehaveexperiencedincreasedcostsand
productiondelayswhenwewereunabletoobtainthenecessaryequipmentorsufficientquantitiesofsomecomponents,and/orhavebeenforcedtopayhigher
pricesormakevolumepurchasecommitmentsoradvancedepositsforsomecomponents,
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