Seagate 2015 Annual Report Download - page 24

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TableofContents
entrytoourmarketawayfromourspecialistresearchanddevelopmentskillsandenableentryforthegeneral-purposedesignskillsfoundinsomelargeEMSand
CEMcompanies.Commoditymarketsaredrivenbyextremelylowmarginsandveryaggressivecompetitivepricing.Ifourmarketbecomesmorecommoditized
andwefailtodeliverinnovativevalue-addedalternativestoourcustomers,wewillhavedifficultycompetingagainstthelargerEMSandCEMcompanies.Ifwe
areunabletocompetesuccessfullyagainstourcurrentandfuturecompetitors,wecouldexperienceprofitmarginreductionsorlossofmarketshare,whichcould
significantlyharmourfinancialcondition.
Ifwedonotdevelopproductsintimetokeeppacewithtechnologicalchanges,ourresultsofoperationswillbeadverselyaffected.
Ourcustomershavedemandednewgenerationsofdiskdriveproductsasadvancesincomputerhardwareandsoftwarehavecreatedtheneedforimproved
storageproducts,withfeaturessuchasincreasedstoragecapacity,improvedperformanceandreliabilityandlowercost.We,andourcompetitors,havedeveloped
improvedproducts,andwewillneedtocontinuetodosointhefuture.Suchproductdevelopmentrequiressignificantinvestmentsinresearchanddevelopment.
Wecannotassureyouthatwewillbeabletosuccessfullycompletethedesignorintroductionofnewproductsinatimelymanner,thatwewillbeableto
manufacturenewproductsinsufficientvolumeswithacceptablemanufacturingyields,thatwewillbeabletosuccessfullymarketthesenewproductsorthatthese
productswillperformtospecificationsonalong-termbasis.Inaddition,theimpactofslowingarealdensitygrowthmayadverselyimpactourabilitytobe
successful.
Whenwedevelopnewproductswithhighercapacityandmoreadvancedtechnology,ourresultsofoperationsmaydeclinebecausetheincreaseddifficulty
andcomplexityassociatedwithproducingtheseproductsincreasesthelikelihoodofreliability,qualityoroperabilityproblems.Ifourproductssufferincreasesin
failures,areoflowqualityorarenotreliable,customersmayreducetheirpurchasesofourproductsandourmanufacturingreworkandscrapcostsandserviceand
warrantycostsmayincrease.Inaddition,adeclineinthereliabilityofourproductsmaymakeuslesscompetitiveascomparedwithotherdiskdrivemanufacturers
orcompetingtechnologies.
Changesindemandforcomputersystemsandstoragesubsystemsmayinthefuturecauseadeclineindemandforourproducts.
Ourproductsarecomponentsincomputers,datastoragesystems,andconsumerelectronicsdevices.Thedemandfortheseproductshasbeenvolatile.
Unexpectedslowdownsindemandforcomputersystems,storagesubsystemsorconsumerelectronicsdevicesgenerallycausesharpdeclinesindemandforour
products.Declinesinconsumerspendingcouldhaveamaterialadverseeffectondemandforourproductsandservicesandonourfinancialconditionandresultsof
operations.
WhilesalestoClientNon-ComputeandCloudSystemsandSolutionsmarketsarebecomingamoresignificantsourceofrevenue,salestotheClientCompute
marketremainanimportantpartofourbusiness.TheClientComputemarket,however,hasbeen,andweexpectittocontinuetobe,adverselyaffectedbythe
growthoftabletcomputers,smartphonesandsimilardevicesandthatperformmanyofthesamecapabilitiesascomputers,thelengtheningofproductlifecycles
andmacroeconomicconditions.WebelievethatthedeteriorationoftheClientComputemarkethasacceleratedrecently,andthatthisaccelerateddeteriorationmay
continueorfurtheraccelerate,whichcouldcauseouroperatingresultstosuffer.Additionally,ifdemandintheClientComputemarketisworsethanexpectedasa
resultoftheseorotherconditions,demandforourproductsintheClientComputemarketmaydecreaseatafasterrateandouroperatingresultsmaybeadversely
affected.
TheEnterpriseStoragemarkethasbeenadverselyaffectedbythegrowthoftheutilizationofNANDflashinmissioncriticalapplications.Thisdeterioration
oftheEnterpriseStoragemarketcouldcauseouroperatingresultstosuffer.
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