HDD Crisis Was Fake: Seagate and Western Digital Post Big Profits

The floods were real, the 300% prices were real and so are the billions in profit

By on April 26th, 2012 22:41 GMT

Hard drive manufacturers Seagate Technology and Western Digital have reported great financial results after such a prolonged hard disk drive “crisis.” 

There was always talk about the fact that hard disk drives are so cheap, that the profitability of the manufacturers is getting low enough to limit the R&D investments they would otherwise make.

Many industry insiders were talking about overstocking and lowering profits. The situation was bleak.

One year ago, Samsung wanted to get rid of their HDD division, despite the fact that the products developed there were quite good. The F1 and F3 lines of desktop HDD are very good performers to this day, and they’ve been since way back in 2008.

Seagate jumped at the opportunity and snatched Samsung’s hard drive division for almost 2 billion dollars, back in April 2011.

Hitachi was also doing quite alright. They had good mobile HDDs and the very successful 1000.C hard disk drive line that excelled when dealing with multi-threaded work. Still, the marketplace for HDDs was so difficult that they’ve announced they’ll be selling their hard drive division to Western Digital.

The Thailand flood came and went and we were left with the hard drive “crisis”. While the hard drives were almost never “out of stock” the prices increased even by 300%.

Months passed by, but there seemed to be no end to the hard drive crisis, despite the fact that both manufacturers were announcing the restoration of the plants affected by the waters.

In a report from earlier his year, we found out that Seagate even managed to increase its HDD shipments with around 2% when compared to the previous year. Where exactly was that “crisis?”

Now Seagate proudly announces it has decided to spend 2.5 billion dollars to repurchase a considerable amount of its outstanding ordinary shares. Spending 2.5 billion dollars less than a year after buying Samsung’s HDD division for another 2 billion doesn’t really seem like a company “suffering” from a “crisis.”

Western Digital, too, has just announced its fiscal third quarter financial results. Despite recently acquiring HGST (that’s Hitachi’s HDD division) in March last year and also “suffering” from a “difficult crisis,” they’ve made a net income of 146 million dollars, or 62 cents per share.

"Our third quarter performance demonstrates the potential of the new Western Digital, with just three and a half weeks of HGST results combined with the standalone WD business," said John Coyne, CEO of Western Digital.

By their reasoning: bad market plus low margins plus the HDD crisis equals big profits.

Good job if we may say. We finally have a humongous duopoly in the hard drive market too. This is probably the most desirable situation for the end-users paying 300% more money for last year's technology.

We shall now wait and see when the prices go back to where they were one year ago, if ever.
Seagate / WD Logo mashup
   Seagate / WD Logo mashup
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