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Ella Lee

Seagate Technology will return to making disk drives for notebook PCs in 2000.

 The tape-drive and disk-drive manufacturer, which also produces storage and information-management software, stopped producing disk drives for portables earlier this year.

 Joel Stead, a vice-president of Seagate's international sales operations, said the sector ceased to be profitable because Seagate lacked the right product technology.

 However, the notebook business was growing fast and Seagate would set up a new research and development team to come up with a new portable drive in 15 to 18 months.

 Seagate regards IBM and Toshiba as its key competitors in the sector.

 However, 'it's easy to compete with them as they also make notebooks themselves, and other notebook manufacturers will probably not buy disk drives from them', Mr Stead said.

 At present, Seagate makes 45 per cent of its disk-drive sales from desktop PCs, and 55 per cent from high-end designs for servers and workstations.

 Seagate leads the high-end segment, where demand is strong and profit margins high. It would expend more effort on cultivating its desktop business, said Mr Stead.

 Seagate has just announced a series of high-end drives for servers and workstations and a new advanced desktop model.

 The Barracuda 50, to be used in servers, holds 50 gb of data, while the desktop Medalist 17240 comes in models storing between 4.3 gb and 17.2 gb.

 However, Seagate's high-end drive revenues in the quarter to October were down on the previous quarter and below projections by US investment bank Salomon Smith Barney.

 Seagate's shipments of disk drives and average selling prices also were lower than Salomon's forecast, although Seagate improved its gross profit margins on disk drives from 15.4 per cent to 17.5 per cent.

 Traditional disk-drive giants - including Seagate, Quantum and Western Digital - have been struggling and losing market share to up-and-coming second-tier players such as Fujitsu and Maxtor.

 For Seagate, this was mostly due to organisational problems, Mr Stead said, such as in the time-to-market for its products and their execution.

 Salomon said Seagate was on the way to a turnaround. It had been able to improve operational efficiency, cut costs and clear inventories, which were at their lowest level in two years.

 Sales of Seagate's desktop PC drives - especially in the sub-US$1,000 market - were better than Salomon's forecast.

 Its new U2 drives had been adopted by Hewlett-Packard and Acer and it planned to roll out another low-cost model for the sub-$1,000 segment, Mr Stead said.

 More key original equipment manufacturers (OEMs) are buying Seagate products. OEMs contribute 63 per cent of its revenues, according to Salomon.



Seagate returns to making disk drives for portables soon