Seagate 2014 Annual Report Download - page 28

TableofContents
equipmentorrawmaterialsthatwereinshortsupplyintheindustryingeneral.Ifanymajorsupplierweretorestrictthesupplyavailabletousorincreasethecost
oftherareearthelementsusedinourproducts,wecouldexperienceashortageinsupplyoranincreaseinproductioncosts,whichwouldadverselyaffectour
resultsofoperations.
Consolidationamongcomponentmanufacturershasresultedandmaycontinuetoresultinsomecomponentmanufacturersexitingtheindustryornotmaking
sufficientinvestmentsinresearchtodevelopnewcomponents.
Ifthereisashortageof,ordelayinsupplyinguswith,criticalcomponents,equipmentorrawmaterials,then:
•itislikelythatoursupplierswouldraisetheirpricesand,ifwecouldnotpassthesepriceincreasestoourcustomers,ouroperatingmarginwould
decline;
•wemighthavetoreengineersomeproducts,whichwouldlikelycauseproductionandshipmentdelays,makethereengineeredproductsmorecostly
andprovideuswithalowerrateofreturnontheseproducts;
•wewouldlikelyhavetoallocatethecomponentswereceivetocertainofourproductsandshiplessofothers,whichcouldreduceourrevenuesand
couldcauseustolosesalestocustomerswhocouldpurchasemoreoftheirrequiredproductsfrommanufacturersthateitherdidnotexperience
theseshortagesordelaysorthatmadedifferentallocations;and
•wemightbelateinshippingproducts,causingpotentialcustomerstomakepurchasesfromourcompetitors,thuscausingourrevenueandoperating
margintodecline.
Wecannotassureyouthatwewillbeabletoobtaincriticalcomponentsinatimelyandeconomicmanner.
Weoftenaimtoleadthemarketinnewtechnologydeploymentsandleverageuniqueandcustomizedtechnologyfromsinglesourcesupplierswhoareearly
adoptersintheemergingmarket.Ouroptionsinsupplierselectioninthesecasesarelimitedandthesupplierbasedtechnologymayconsequentlybesinglesourced
untilwideradoptionofthetechnologyoccursandanynecessarylicensesbecomeavailable.Insuchcasesanytechnicalissuesinthesupplier'stechnologymay
causeustodelayshipmentsofournewtechnologydeploymentsandthereforeharmourfinancialposition.
Oursubstantialleveragemayplaceusatacompetitivedisadvantageinourindustry.
Weareleveragedandhavesignificantdebtserviceobligations.Oursignificantdebtanddebtservicerequirementscouldadverselyaffectourabilitytooperate
ourbusinessandmaylimitourabilitytotakeadvantageofpotentialbusinessopportunities.Forexample,ourhighlevelofdebtpresentsthefollowingrisks:
•wearerequiredtouseasubstantialportionofourcashflowfromoperationstopayprincipalandinterestonourdebt,therebyreducingthe
availabilityofourcashflowtofundworkingcapital,capitalexpenditures,productdevelopmentefforts,strategicacquisitions,investmentsand
alliances,andothergeneralcorporaterequirements;
•oursubstantialleverageincreasesourvulnerabilitytoeconomicdownturnsandadversecompetitiveandindustryconditionsandcouldplaceusata
competitivedisadvantagecomparedtothoseofourcompetitorsthatarelessleveraged;
•ourdebtserviceobligationscouldlimitourflexibilityinplanningfor,orreactingto,changesinourbusinessandourindustryandcouldlimitour
abilitytopursueotherbusinessopportunities,borrowmoremoneyforoperationsorcapitalinthefutureandimplementourbusinessstrategies;
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