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Seagate profits rise 750 per cent thanks to high prices

Reaping the rewards of higher prices and shorter warranties
Tue Jul 31 2012, 16:11
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STORAGE VENDOR Seagate joined Western Digital in boasting about how profitable the Thai floods have been, with profits ballooning 750 per cent to $1bn.

Seagate, which was largely unaffected by the Thai floods last year, decided to raise prices by only 20 per cent in order to make the most of constrained supply from firms like Western Digital. As the flood waters receded both Seagate and Western Digital managed to keep prices high and the result for Seagate is a 56 per cent increase in revenues to $4.5bn in the three months ending 29 June.

While Seagate's revenues have risen handsomely, it's profitability has gone exponential with a 750 per cent increase to $1bn. The firm also managed to cut its long-term warranty liabilities by $31m during the quarter, which is not surprising given that the company has cut its warranties to a pitiful 12 months on most of its products.

Despite the Seagate's highway robbery profits the firm's CEO Steve Luczo showed disappointment for not turning the screws on its customers even tighter. "As we announced previously, we were disappointed not to meet our revenue and margin plan for the fourth quarter as a result of the industry's faster recovery from the supply chain disruption and an isolated supplier issue that we experienced," said Luczo.

Seagate also announced that it nabbed Gary Gentry to head its solid-state business. Gentry was previously Micron's general manager of enterprise solid-state disk (SSD) drive products.

Western Digital, Seagate's main rival posted similar financials recently and showed just how much cash the storage firms have been making while hard drive prices remain inflated and warranties have been slashed to the bare minimum. However, unless prices go up, both Seagate and Western Digital will start to see the effects of increasing SSD competition take a toll on their income statements. µ


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