The short-term outlook continues to be bearish for the industry...
....Analysts don't expect the inventory glut, particularly in desktop hard drives, to dry up for at least another quarter, or perhaps even into the second or third quarter of next year. This will keep prices in favor of the buyer.
"Pricing right now is extremely aggressive - two times the normal double-digit price decline in drive capacities - and this is supposed to be the best quarter of the year," Tenney said.
IBM looms as threat to hard drive leaders
techweb.com
Greg's summary of his conversation with Donald Waite, SEG CFO, provided a bleaker outlook....
15) He likened the current situation to one that occured in '91. However he did say that there is more competition today than 6 years ago....
1991 was the start of the last round of savage price wars that lasted several years and eventually saw Conner swallow about $400 million in losses in 1994 and Maxtor hawk disk drives on QVC, the TV shopping network, in a desperate attempt to gain market share points in 1995. Here's a brief excerpt from a bio on Shugart that describes that period....
....Shugart also took direct control of Seagate's operations when the board ousted Mitchell in 1991. Shugart became president, as well as chairman and chief executive, and began shaking things up. He also pushed vertical integration.
Seagate's vertical integration, allowing it to capture more margin, and its stronghold in the higher end of the market, enabled the company to weather the industry's bloody market-share battles over the next three years...
Pioneer Of The Disk-Drive Frontier -- Alan Shugart
techweb.com
As always, there's a mad scramble underway to increase the pace of innovation to protect margins and capture market share. One can see IBM and Toshiba (in collaboration with TDK and Yamaha) accelerate the move to Giant MR. One can see RDRT redouble its effort to achieve its goal of growing density at 60-80% CAGR instead of the industry norm of 60% CAGR. One can see IBM and SEG bring 7200 rpm to the desktop to try to dominate the 4 GB and above segment of the desktop, etc, etc....
This could get really bloody. |
