<<No body makes money with cheap drives?>> Maxtor does (while giving away $30 to customer in retail) and everyone else in the business does except WDC. Maxtor does not offer high end storage solutions, that is left to EMC, SEG, CPQ, and IBM. Maxtor's average sale price per drive is $135 and this did not fall from its previous quarter. They make good bit of money at $135.
Lets look at the effect of IBM and DELL deal. The deal is for 14 billion dollars over 7 years. That works out to be slightly more than 2 billion dollars. The deal is not all about disk drives. The deal is also about microelectronics, networking, and video-display products. The way video display market is changing, most of the money will go towards to this segment. Then I would say networking, then high-end storage, and then only the low-end disk drives that Maxtor competes. If we say 1/4th of this is for storage solutions, then low-end disk drives will be a small portion of it. I would say less than 200 million dollars per year. Considering these deals are generally back loaded just like our professional sport stars the effect in the next few years will be lot less than 200 mil. You need to add up the growth rate of disk drive industry to it. I know it did not grow in the last 2 years but it will grow at 10% rate over next few years. 200 million dollar hit can be easily absorbed by MXTR, QNTM, and WDC through the growth. |
