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TableofContents
marketsandcustomersplacevaryinglevelsofemphasisonthesefactors,webelievethatourproductsarecompetitivewithrespecttomanyofthesefactorsinthe
marketsthatwecurrentlyaddress.
PrincipalDiskDriveCompetitors.Therearethreecompaniesintheelectronicdatastorageindustrythatmanufacturediskdrives:
•Seagate,sellingtheSeagate,LaCie,MaxtorandSamsungbrands;
•WesternDigitalCorporation,operatingtheWesternDigitalandHitachiGlobalStorageTechnologiessubsidiaries;and
•ToshibaCorporation
OtherCompetition.WeareseeingdirectcompetitionfromSSD'sthatisadverselyimpactingdemandforHDDinsomemarketsincludingNotebookand
EnterpriseMissionCritical.Weexpectthatthistrendwillcontinuealthoughwebelievebothproducttypeswillberequiredinthemarkettosatisfythegrowing
demandforelectronicdatastorage.
PriceErosion.Historically,ourindustryhasbeencharacterizedbypricedeclinesfordiskdriveproductswithcomparablecapacity,performanceandfeature
sets("like-for-likeproducts").Pricedeclinesforlike-for-likeproducts("priceerosion")havebeenmorepronouncedduringperiodsof:
•economiccontractioninwhichcompetitorsmayusediscountedpricingtoattempttomaintainorgainmarketshare;
•fewnewproductintroductionswhencompetitorshavecomparableoralternativeproductofferings;and
•industrysupplyexceedingdemand.
Diskdrivemanufacturerstypicallyattempttooffsetpriceerosionwithanimprovedmixofdiskdriveproductscharacterizedbyhighercapacity,better
performanceandadditionalfeaturesetsandproductcostreductions.
WebelievetheHDDindustryexperiencedbenignpriceerosioninfiscalyear2014,whereaspriceerosionincreasedinfiscalyears2015and2016.
ProductLifeCyclesandChangingTechnology.Successinourindustryhasbeendependenttoalargeextentontheabilitytobalancetheintroductionand
transitionofnewproductswithtime-to-volume,performance,capacityandqualitymetricsatacompetitiveprice,levelofserviceandsupportthatourcustomers
expect.Generally,thedrivemanufacturerthatintroducesanewproductfirstbenefitsfromimprovedproductmix,favorableprofitmarginsandlesspricing
pressureuntilcomparableproductsareintroduced.Changingtechnologyalsonecessitateson-goinginvestmentsinresearchanddevelopment,whichmaybe
difficulttorecoverduetorapidproductlifecyclesandeconomicdeclines.Further,thereisacontinuedneedtosuccessfullyexecuteproducttransitionsandnew
productintroductions,asfactorssuchasquality,reliabilityandmanufacturingyieldscontinuetobeofsignificantcompetitiveimportance.
Seasonality
Thediskdriveindustrytraditionallyexperiencesseasonalvariabilityindemandwithhigherlevelsofdemandinthesecondhalfofthecalendaryear.This
seasonalityis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.
Webelievefiscalyear2015reflectedseasonalityconsistentwithhistoricalpatterns,whereasinfiscalyear2014ourindustryexperiencedmoremutedseasonal
patternsassupplyanddemandwererelativelyinbalance.Infiscalyear2016,beyondtraditionalseasonality,variabilityofsaleswasareflectionofmorecyclical
demandfromCSPsbasedonthetimingoflargesystemsinstallationsandtheshiftoftheunderlyingtechnology.
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