Sarmad,
The comments that follow are strictly the ravings of an undoubtedly paranoid, bitter fellow:
I think that these pressures are at bottom inspired by Seagate on the one hand, and the structure of the sector on the other. I think that many of the pressures of tha past couple of years were initiated by Seagate as part of its long term LBO plan. I don't know if you were around then, but remember when both Brown at QNTM and whatshis name at Maxtor publicly complained that the price wars that were occurring were unnecessary and that the demand cycle was such that they all ought to be making money if only certain unnamed parties weren't playing pricing games? Well, the threads all said the same thing, that Seagate was the unnamed party, and there weren't any denials from them. So they began this long, long round of wars, then others had to follow then in order to maintain their market share and corporate structure, then it acquired a kind of momentum of its own, that is, the boxmakers see how few big customers the DD vendors have, they have price pressures of their own, so they squeeze a little, then a little more, oh just a few dollars more off of these drives, OK? Well, you're one of our 10% customers, so I guess, and pretty soon the DD vendors aren't just shipping drives but $10 bills with each drive.
Can it end? Yes. Will it end? I think it will in the ripeness of time. One end will come after the LBO. Then it will be in Seagate's interest to bring them to an end. They will once again want to make money. The wild cards in this scenario are Fujitsu and Samsung. Samsung is still very small and can't really affect much this year, but will they try to get much bigger? Fujitsu has taken market share, there is a rumor afoot that they will buy Seagate's operations at some point after the LBO (what a heist that would be!), what will they do? Both of these companies are now profitable in other operations which could finance yet another competitive round of price war. Will they?
I don't know.
Sam |
