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

[Pikarya]

http://news.softpedia.com/images/new...Profits-h2.jpg

Source

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.

[D44kpunk]

if true, upsets me greatly

[LiquidFriend]

I'm trying my hardest to act like I'm shocked.

trying
trying
Yeah I'm not surprised.

[hey]

And would they still have made such profits if they didn't raise prices?

[Correction]

The growth in demand vastly outstripped the growth in supply. This doesn't add up to some huge mystery or conspiracy afoot.

[The Stig]

I figured there was something fishy.

Our local stores (and online stores) here talk about it all the time, and posted warnings everywhere.

Yet they're never out of stock. I did suspect something (it's been a while, afterall). As I've been looking to buy an external one to replace a very old/small one, but didn't yet, as I wanted to keep an eye on the situation (stock/price).

[hey]

Why is it suspicious that they are never out of stock? I don't know about everyone else, but i have not bought a new hdd since the prices started going up, and i will not until they drop way down. Is it really that hard to imagine that when the prices went up so high, the demand also dropped down enough to not outpace supply?

[Anakron]

The article mentions that Seagate actually shipped more drives compared to the year before, so it would appear that they actually shipped (sold?) more during said "crisis," while upping the prices at the same time.

[Pikarya]

It obviously takes a full year to make your factory to get its ass back into gear after a "crisis". I guess when Toyota/etc. lost all their plants over in Japan they were increasing car prices 300%? Right?

This shit was a sham from the get go. Sure you can play the cripple card for a month or two on a broken ankle but to extend this into almost over a full year.

[Correction]

The article mentions that Seagate actually shipped more drives compared to the year before, so it would appear that they actually shipped (sold?) more during said "crisis," while upping the prices at the same time.

Because demand actually went up. Why are people pretending it didn't?

[Anakron]

Because demand actually went up. Why are people pretending it didn't?

I was responding to 'hey' who posted before me, saying that the supply kept up with demand because demand actually went down.

How do you actually determine demand, though? By sales number? That alone isn't an accurate reflection. I'm looking into HDDs myself, so I'm kind of interested in this. A 750GB 7200 RPM WD goes for about $100-$120 on Amazon, how low were they a year or two ago?

EDIT: Looked up my Amazon history, I bought a 500GB 5400RPM 2.5" in October 2010 for $55, it's now $80.

[Correction]

You determine demand by watching the sales of hardware with hard drives in them. Tablet computers and cloud-based services all exploded last year, which siphoned supply that would have otherwise been allocated to drives put into PCs. Yes they shipped more drives. But the huge demand drove up prices because that's basic macroeconomics.

[The Stig]

I have no concrete proof but as I somewhat regularly check prices I've not notice the price go up that much more (stuff is expensive here anyway), and yet that "crisis"/"shortage" label is still being thrown around.

I just went to my usual site. The labels are gone ...

I swear it was there 2 weeks back.

[Pikarya]

I have no concrete proof but as I somewhat regularly check prices I've not notice the price go up that much more (stuff is expensive here anyway), and yet that "crisis"/"shortage" label is still being thrown around.

I just went to my usual site. The labels are gone ...

I swear it was there 2 weeks back.

They are still being thrown up in retail stores in the USA. Office Depot/Office Max/etc.

[Correction]

Prices aren't really higher. In 2008 I paid $130 for a 1TB 7200 RPM Seagate.
Checking newegg today, I can get a drive with identical specs for $109.
Whoops!

Yeah, the 'crisis' is overblown but I wonder if people actually remember how expensive hardware was in the 'good old days' of 3-4 years ago. If prices squeeze upwards it's for the aforementioned reasons, not because HDD manufacturers faked a supply crunch.

[hey]

Prices aren't really higher.

Yes they are, comparing to 2008 is retarded.

Back in my day, i bought an 8 megabyte hard drive for $300, what are you complaining about!?

[Correction]

Yes they are, comparing to 2008 is retarded.

Back in my day, i bought an 8 megabyte hard drive for $300, what are you complaining about!?

Would you have me compare it to 2010 and 2011? Okay.

With some digging I find this review of the Seagate ST32000641AS, a 2TB SATA 6.0GB/s drive released 2010. Price? $259.99
Somehow, Seagate put out a new model 2TB (the ST2000DM001), at -$10MSRP in 2011. The price is now half that.

I probably didn't even need to go through all this trouble. Searching 2TB drives with 2-3 year warranties on newegg shows a cost/GB of $0.06/GB ~ $0.09/GB. I await the numbers you have for 2010 and 2011 to show this substantial cost increase for drives.

[hey]

lol. Seriously? Is that the most expensive thing you could dig up?

First thing i found: http://web.archive.org/web/201009091.../dp/B002ZCXK0I

$110 for 2 tb the day before the floods, and i know there was cheaper. Current price on amazon for this particular drive though is $130. $20 more than it was then. Sorry but prices have in fact gone up.

Here's more:

500 gb hdd on november 9th $38. Current price? Eighty four US dollars. More than double.

Nice try though.

[Pikarya]

79.99 on some deals also for 2tb. I remember very clearly since I was thinking about ordering another drive to raid.

[hey]

That's about what i was expecting, thanks for confirming!