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Seagate on Tuesday reported financial results for the quarter ended December 30, 2011. Shipments of hard disk drives (HDDs) dropped only 3.1% in terms of units, but at the same time the Seagate's earnings increased by 18.5%, whereas the company's profitability rose whopping 375%. With increased pricing and long-term supply agreements, the HDD industry will change for a long time.

The company shipped 47 million disk drives and reported revenue of $3.2 billion, gross margin of 31.6%, net income of $563 million and diluted earnings per share of $1.28. At the same time a year ago the company shipped 48.9 million disk drives and on a GAAP basis reported revenue of $2.7 billion, gross margin of 19.5%, net income of $150 million and diluted earnings per share of $0.31.

The company's increased revenues and profitability are conditioned by substantially boost of hard disk drive pricing due to supply constraints at Hitachi GST, Western Digital and Seagate itself. According to Seagate, its average selling price per unit increased $13 compared to the previous quarter. The HDD makers did not compete for demand, but rather PC makers competed for supply and makers adjusted their business models.

"Seagate dramatically reduced product configuration complexity and moved the vast majority of our fulfillment process to direct factory shipments. These efforts have fundamentally altered demand planning dynamics with our customers and have resulted in a much better alignment of supply and demand. We expect that these improvements to supply chain management will become standard practice as our industry fully recovers over the course of calendar 2012, benefiting our industry, suppliers and customers," said Stephen Luczo, chief executive officer of Seagate.

Seagate notes that during the second quarter of fiscal 2012 it signed a number of long-term supply agreements (LTAs) with its partners among PC suppliers and OEMs. The executed LTAs are expected to account for an excess of 60% of Seagate's total production capacity during the calendar year. Seagate believes that long-term agreements improve forecast accuracy, unit volume and pricing visibility, product build planning and logistics.

Essentially, Seagate implies that the hard drive industry will never be the same and HDDs will not become commodity products like dynamic random access memory (DRAM) where customers dictate pricing.

Tags: Seagate, HDD, Business

Discussion

Comments currently: 12
Discussion started: 02/01/12 07:44:31 AM
Latest comment: 02/29/12 09:45:46 PM
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[1-9]

1. 
The thieves, they stole us and they call it profits

"Shipments of hard disk drives (HDDs) dropped only 3.1% in terms of units" So where are the shortages
7 1 [Posted by: madooo12  | Date: 02/01/12 07:44:31 AM]
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- collapse thread

 
And those 3% lower shipments are because consumers bought 3% less hard drives due to impossible high prices, not because they couldn't produce them... Thieves. It's quite clear now.
1 0 [Posted by: LuxZg  | Date: 02/05/12 01:33:30 AM]
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2. 
"...benefiting our industry, suppliers and customers." Here, 'customers' refers to PC makers. Consumers are not benefited.

I guess it is just the nature of things for them to maximize their profits. One thing that they are wrong about though, is that consumers do get to vote with their wallets in the long run.
6 2 [Posted by: gamoniac  | Date: 02/01/12 10:07:37 AM]
Reply

3. 
They learned well from the oil Cartel... If there's a judgment day, they will be held accountable.
6 1 [Posted by: beenthere  | Date: 02/01/12 10:51:34 AM]
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- collapse thread

 
What oil Cartel? Cartel is alive and well, and charges more for black gold. There is no judgment day.
1 2 [Posted by: dmk2000  | Date: 02/01/12 01:21:01 PM]
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4. 
I wanted to purchase some new 2TB drives to upgrade from my current 1TBs and the one 1.5TB but prices are ridiculous. It definitely feels like we are being robbed here. yeah, there was a flood in Thailand but I am afraid that prices will stay high throughout 2012 and won't be seeing prices that we enjoyed just a few months ago until late 2012 or early 2013.

They will use Thailand as an excuse the keep prices high so they can rake in the cash.
2 1 [Posted by: RtFusion  | Date: 02/01/12 01:47:05 PM]
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5. 
Wow. That article is a very nice way to say:
Sorry guys, but you need to know that some tough looking guy called W.D. Seagate is gonna smash your balls and rob you until you are left without a cent in your pockets, and without balls in your pants.
1 1 [Posted by: misterXmister  | Date: 02/01/12 02:27:19 PM]
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- collapse thread

 
Doesn't that make you feel warm and fuzzy - all over?
2 1 [Posted by: beenthere  | Date: 02/01/12 06:13:55 PM]
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6. 
The govt. should investigate them for price gouging. High profit means they were using a "shortage" as a smoke screen to jack up their selling prices even though the cost to manufacture was unaffected. Sorry, but you can't claim a "shortage" unless cost to manufacture goes up as well as selling price.
1 1 [Posted by: AnonymousGuy  | Date: 02/01/12 07:14:30 PM]
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7. 
The DRAM makers got caught price fixing several times and consumers got a total rebate of $3 while the paid liars got millions for their "services". We live in a FUBAR'ed world where crime pays big, real big. If you have enough gold you can buy all the "justice" you desire.

Intel has made windfall profits from chronic violation of anti-trust laws worldwide, even after being fined $1.45 Billion by the EU. The message was clear to other unscrupulous purveyors.

http://www.nytimes.com/20...mpete.html?pagewanted=all
3 2 [Posted by: beenthere  | Date: 02/01/12 07:52:28 PM]
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8. 
they (seagate & western digital) need extra money so that they can build factory on the tibet range
thats why they still not dropping the price.
welcome to the world of capitalism. makes more money and lets the idiots (who buys) suffers!
1 0 [Posted by: cybersans  | Date: 02/03/12 07:52:12 PM]
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9. 
"...Seagate implies that the hard drive industry will never be the same and HDDs will not become commodity products like dynamic random access memory (DRAM) where customers dictate pricing." What does that mean? Did they mean they will never reduce the Price? This is absolutely robbery......
0 0 [Posted by: tks  | Date: 02/29/12 09:45:46 PM]
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[1-9]

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