WD Sees Storage Market's Possibilities, Pitfalls
By Doug Olenick -- TWICE, 7/17/2006
New York — The proliferation of hard-drive-based CE and computer devices may present a golden opportunity for storage vendors, but the category is not without its pitfalls, said John Coyne, Western Digital's president/COO.
The primary obstacle is the cutthroat level of competition that exists, Coyne told analysts attending the Bear Stearns 2006 Technology Conference held here in June. In the 1980s there were 130 hard drive makers; by the turn of the century that number was down to nine, and in 2006 it has been boiled down to just six, he said, making for a very tight market.
“The hard drive business today is a great place to be. It is rapidly expanding, especially in entertainment — plus, there is robust PC growth. However, it is not an easy place to thrive,” Coyne said.
Coyne was named president/COO in May. Previously he was worldwide operations VP.
At the conference Coyne expressed little concern over the recent soft state of the hard-drive market, saying the June time frame is historically soft, although he noted that price declines normal for this time of year were at the higher end of the spectrum compared with past years.
Besides dealing with tougher competitors, Western Digital has to spend increasingly larger sums of money on capital investments and research and development.
“These investments are three times higher now compared to 2003,” Coyne said.
The growing importance of entertainment devices and branded storage products has created their own difficulties and benefits. While selling through retail has widened Western Digital's customer base, it is a challenge to properly serve consumers, he said.
With all these obstacles noted, Coyne went on to list the opportunities he sees for Western Digital. These include the 2.5-inch drives for mobile category that Coyne said is growing at a 15 percent to 20 percent annual rate, with the industry expected to ship 100 million units in 2006. The 3.5-inch drive for desktop PCs and PVR-type devices is growing at a 50 percent clip, and the branded-products area was described as harboring significant growth opportunities for Western Digital.
Coyne downplayed the role that the new perpendicular recording technology will play in the category. Western Digital is a latecomer with its drives based on this high-density recording technology not expected out until later this year, well after its main competitor Seagate brings its version to market.
Being second was not an issue for Coyne, who said the new technology is not a “game breaker” for the industry, but instead simply allows companies to continue adding capacity at rates required by manufacturers and consumers. This ability had been lagging of late with requirements outstripping the hard-drive maker's capabilities.
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