Seagate Technology knows that if you want to survive in the storage market, you'd better have drives. The company is a leading independent maker of storage systems for electronic data. It make hard disk drives (HDDs), solid state drives (SSDs), and solid state hybrid drives (SSHDs) as well as devices for managing storage. Seagate's drives are are used in systems ranging from personal computers and consumer electronics to high-end servers and mainframes. The company sells directly to computer manufacturers and through distributors. The company sells directly to OEM customers including HP Inc. and Dell and to distributors and retailers. Seagate generates around 70% of its sales outside the US. France-based LaCie is a Seagate subsidiary.
Seagate makes its memories in Malaysia, China, Northern Ireland, Singapore, Thailand, the UK, and the US. Nearly half of the company's sales originate in Singapore, with 30% coming from the US and 16% from the Netherlands.
Sales and Marketing
Dell accounted for 12% of Seagate's sales in 2016 (ended June). Before it split into two companies, Hewlett-Packard accounted for about 12% of Seagate's revenue. Neither of the new entities, HP Inc. nor Hewlett Packard Enterprise, accounts for more than 10% of revenue.
Seagate's revenue dropped 19% to $11.1 billion in 2016 (ended June) from $13.7 billion in 2015. The company experienced lower demand for storage devices used in computers and other devices and for mission-critical storage devices.
The lower sales sent profit into free fall. The company's net income plunged 86% to $248 million in 2016 from $1.7 billion in 2015.
Cash flow from operations fell to $1.7 billion in 2016, compared to $2.6 billion in 2015.
Seagate has clung to about a 40% share of the HDD market in competition market leader Western Digital and third place contender Toshiba. Seagate and its competitors face a challenging environment in which HDD sales are falling as sales of SSDs are on the rise. Seagate has reduced its production of HDDs to 35 million to 40 million a quarter compared to previous levels of 55 million to 60 million. It has reduced production capacity as well, cutting headcount and consolidating manufacturing lines. The company intends to shift production to drives with more memory and higher prices from drives with capacities of 500 gigabtyes or less.
When Seagate says high capacity, it means it. The company released several storage devices that hold some 10 terabytes of data. The Guardian series of HDDs were built to help customers manage and move large amounts of data. Models include the BarraCuda Pro desktop drive, the IronWolf, and the SkyHawk. New 10 TB helium enterprise drives are aimed to cloud storage providers.
Mergers and Acquisitions
Seagate spent more than $1 billion to acquire SSD storage assets.
In 2015 the company bought Dot Hill Systems Corp., a provider of storage arrays and storage software, to boost its cloud offerings. Seagate paid about $650 million. The previous year Seagate bought LSI’s Accelerated Solutions Division and Flash Components Division from Broadcom Limited for about $450 million to enhance and expand its flash products.