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Seagate Technology Holdings (STX)Stock (Consumer Products Industry, Data Storage Devices Industry, Manufacturing Industry, Property Management Industry)
 Seagate is the undisputed market leader in terms of sales with a market share of 35%. However, it faces intense competition from rival Western Digital (WDC) and "captive" manufacturers Hitachi, Samsung, Toshiba, and Fujitsu. Captive competitors bundle hard drive sales with other products, so they are able to sell drives at break-even profit or, sometimes, even lower. In addition, advances in solid state devices (SSDs) containing flash memory threatens Seagate's revenue, because SSDs have many advantages over traditional hard drives, especially in mobile applications. Seagate was the first to make perpendicular recording a commercial success. This technology allows for greater data capacities and faster access speeds. Seagate currently offers 3.5" drives in capacities up to 750 GB using perpendicular recording, the largest of its kind in the industry. The company is moving to transition all of its products to incorporate the technology.
[edit] Corporate OverviewSeagate's revenue has grown by almost 50% over the past 3 years, culminating in 2006 with $9.2 billion in total sales. A significant expansion occurred in 2006 with the acquisition of Maxtor (see #Maxtor acquisition). Revenue growth has been efficient, as operating income nearly doubled in that same time period due to the the growing demand for digital storage, especially in the mobile hard drive market. The company has also increased investment in research and development, and Seagate is the first company to have commercial success with perpendicular recording, a storage technology that is believed to have the potential of storing 10 times as much information as traditional longitudinal formats. Continued product development is necessary to gain a foothold in new markets and to outpace the threat of competing flash memory.
Source: Company Reports.
[edit] ProductsPercentages in parentheses denote share of unit sales in FY 2005, when the company sold 98.1 million total units.
[edit] CustomersPercentages in parentheses denote share of revenue in 2006.
[edit] Maxtor acquisitionIn 2006, Seagate acquired rival hard drive maker Maxtor in a stock transaction worth $1.9 billion. Before the acquisition, Seagate and Maxtor held 29% and 12% of the hard drive market respectively. The merger solidified Seagate's position as the market leader, gave Seagate rights to Maxtor's popular "OneTouch" line of external hard drives for consumers, and expanded Seagate's retail business. Although Maxtor was posting losses before the merger, the two companies intend to save $300 million in redundant costs. However, it is uncertain how soon these cost savings can be realized, and the acquisition may reduce short-term profitability. [edit] Trends and Forces[edit] Flash memoryAdvances in flash memory technology and growing sales have put pressure on the hard drive market. Unlike hard drives, flash memory are solid state devices, so they contain no moving mechanical parts, use less power, are smaller and less likely to break. These advantages make flash memory very attractive for use in portable devices such as digital music players and cameras. Flash memory has not replaced hard drives because cost is higher, transfer speeds are slower, and there is a limit of approximately 100,000 read/write operations. However, each of these limitations are being gradually overcome with technological advances. The next advance for flash memory would be to replace hard drives in hard drive-based digital music players, such as iPods, and laptops. Flash memory makers such as SanDisk would have the most to gain from adoption of the new technology, while hard drive manufacturers such as Western Digital and Seagate would have the most to lose. Diversified companies like Samsung would be less affected, because they manufacture both types of storage or other types of products. Samsung and SanDisk have both announced or released solid state disks (SSDs) up to 64 GB, which can effectively compete with smaller sized hard drives. Dell has already began shipping ultra-portable laptops with SSDs. Although hard drives are still the dominant storage device, hard drive manufacturers are wary of the threat of flash memory. [edit] Perpendicular recordingPerpendicular recording is a data recording technology that allows for greater data densities, which leads to greater drive capacities and faster access speeds. Traditionally, bits of digital data are stored as magnetic information on the hard disk platter with the magnetic poles aligned along the plane of the platter. There is a physical limit to how closely data can be packed while maintaining data stability. However, perpendicular recording technology overcomes this limit by aligning the poles of magnetic information perpendicular to the platter using a different writing mechanism and recording material with higher magnetic fidelity. Whereas traditional longitudinal recording has an estimated limit of 100 to 200 gigabits per square inch, perpendicular recording allows for densities of up to 1000 gigabits per square inch. Hard drive manufacturers are expected to adopt the technology rapidly because current data densities are near the physical limit. Seagate was the first to successfully implement the technology, and is currently shipping 3.5" drives with capacities up to 750 GB. In comparison, Western Digital's largest 3.5" drive, which uses traditional longitudinal recording, has a maximum capacity of 500 GB. Seagate has announced that it will intend to eventually make perpendicular recording a standard feature in all of its drives. [edit] Commoditization of PCsOver the last few decades, PCs have become an increasingly important part of our daily domestic and work lives. PC's are used for tasks ranging from rudimentary email and word processing to advanced computer programming. Commoditization, in the business world, is a process that transforms the market for a unique, branded product into a market based on undifferentiated price competition. The commoditization of PCs would hurt PC manufacturers and OEM component suppliers such as Seagate, as they face intense pressure to lower prices. [edit] Comparison to Competitors The market is divided into "independent" and "captive" manufacturers. Seagate and Western Digital are independent manufacturers, meaning that they are entirely focused on manufacturing hard disk drives. Captive manufacturers Hitachi, Samsung, Toshiba, and Fujitsu are more diversified companies with a hard drive division. Captive competitors may sell hard drives at break even profit or even at a loss when it can bundle drives with other more profitable components, such as computer memory, for example. This makes competition especially intense and sometimes irrational for independent manufacturers like Seagate. Due to the similarities in market share and business focus, Seagate and Western Digital are chief rivals in the market. The two companies' offerings cover 97% and 90% of the market respectively. Both companies produce desktop, mobile, enterprise, and consumer electronics products, and sell mainly to OEMs. Thus, many of the same market forces such as seasonal changes in sales and commoditization of PCs affect the two companies in the same ways. One particularly important rising competitor to hard drives are flash memory-based solid state devices (SSDs). Unlike hard drives, flash memory are solid state, so they contain no moving mechanical parts, use less power, are smaller and less likely to break. These advantages make flash memory very attractive for use in portable devices such as digital music players and cameras. Flash memory has not replaced hard drives because cost is higher, transfer speeds are slower, and there is a limit of approximately 100,000 read/write operations. However, each of these limitations are being gradually overcome with technological advances. Samsung and SanDisk have announced or released SSDs up to 64 GB that have already began to replace hard drives in ultraportable laptops. Although hard drives are still the dominant storage device, SSDs represents an impending threat to Seagate's business. Seagate was the first to make perpendicular recording a commercial success. This technology allows for greater data capacities and faster access speeds. Seagate currently offers 3.5" drives in capacities up to 750 GB using perpendicular recording, the largest of its kind in the industry. The company is moving to transition all of its products to incorporate the technology.
 Seagate Technology Holdings2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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