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Seagate sees 300 percent rise in profits thanks to Thai floods

The economics of profiteering
Thu Nov 01 2012, 13:29
Seagate Enterprise Performance 10K HDD

STORAGE VENDOR Seagate reported a three-fold increase in profits to $582m for the first quarter of fiscal 2013.

Seagate was the big beneficiary from last year's floods that resulted in its rival Western Digital suffering supply issues. After Seagate slashed warranties and increased prices, the profits flowed, with the firm reporting a 315 percent increase in profits to $582m on revenues of $3.7bn.

Although Seagate and Western Digital have done exceedingly well out of the Thailand floods by keeping prices high and reducing warranties on the majority of their hard drives, prices have come down considerably in the past few months. SSD vendors such as Crucial, OCZ and Kingston have also piled on the pressure by aggressively cutting prices in a highly competitive market, leaving Seagate, Western Digital and to a lesser extent Toshiba with no choice but to bring prices down to pre-flood levels.

Steve Luczo, chairman and CEO of Seagate said, "Seagate continues to adapt to dynamic industry conditions, managing inventory and demand with our customers while maintaining investments in our technology portfolio that will position us for continued success in the marketplace over the long-term. Returning value to shareholders remains a top priority with over 70 [percent] of our operating cash flow going towards share redemptions and dividends this quarter."

Seagate's and Western Digital's purchases of Samsung's and Hitachi's hard drive operations should mean that even though they are reducing prices to more reasonable levels, it is unlikely that their profit margins will go back to pre-flood levels. µ

 

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