Enjoying Market Manipulation – Western Digital Posts Huge Profits Again – Part 2

After decades of oversupply and harsh competition in the global market, two of the world’s biggest HDD makers decided to buy all other competitors and increase prices to levels unheard of before.

You really need to check out the first part of this series before reading any further.

In 2011, Western Digital bought Hitachi’s HDD division and was obligated by the authorities to sell some patents and equipment to Toshiba, just to make the latter look like a HDD competitor, and Seagate bought Samsung’s great HDD division.

On the other hand, Toshiba is only manufacturing 2.5” laptop HDDs and some 2.5” enterprise products so, basically, WD and Seagate are enjoying a 100% duopoly in the desktop PC 3.5” HDD and server market.

When the Thai floods hit in autumn of 2011, both companies decided to profit from the market panic that was created.

Instead of reassuring their customers that they had huge stockpiles of HDDs in storage all over the world, both WD and Seagate doubled and even tripled their prices.

Naive, uninformed clients thought that this was a simple question of supply and demand, and because WD’s factories were flooded, they thought the market was in a shortage and accepted paying the huge prices.

Seagate and WD’s shipments later showed that there was no shortage and that Seagate even managed to ship more HDDs than it did the previous year, just because it had enough stock left and awaiting customers.

The profits following the price increase were tremendous, and knowing that the market was completely changed, both companies started spending billions of dollars to buy back their shares from the market, as the value of those shares was only going up.

The industry insiders and well-informed investors knew what was happening and the shares of the two companies went crazy.

Make sure you read the third part of our HDD market analysis here, and find out how you’re getting robbed by the HDD makers.

Enjoying Market Manipulation – Western Digital Posts Huge Profits Again – Part 3