Western Digital has yet again posted record financial results for the fiscal quarter ending in June 2012. The company’s net income was 272% higher than the same period last year, and WD managed to spend a whole $1.1 billion in cash in the midst of the global economic downturn.
The HDD market has long been in a continuous competitive and unprofitable loop for the last two decades.
The prices of hard drives were quite small and competitive, and the margins were modest, but the status quo was really not pleasant for the manufacturers.
They were forced to buy huge amounts of HDD parts from their suppliers to ensure considerable supplier discounts and, because HDDs are a commodity and the prices were stable, the manufacturers were heavily overproducing.
Practically, Seagate was building HDDs in 2010 that it knew won’t have a chance to sell until 2011. There wasn’t much worry about this, as the prices were not fluctuating like the prices of CPUs, for example.
Every HDD maker had huge stockpiles of fresh HDDs that were waiting to be shipped, and sometimes the wait took more than 12 months.
Slowly but steadily, the companies started buying and consolidating.
Maxtor bought Quantum. Seagate bought Maxtor and Quantum altogether.
Early last year, Seagate bought Samsung’s great HDD division, the maker of the famous Samsung F1 and F3 series.
Western Digital bought Hitachi’s HDD division, and then the whole HDD market was left with two players owning 90% of the global market and Toshiba holding the rest.
Make sure you read the second part of our HDD market analysis here, and find out how you’re getting robbed by the HDD makers.