The effect of Seagate's dilatoriness has showed itself in its financial second quarter results. Desktop, consumer electronics and enterprise drives all showed unit ship amount gains whereas notebook drive shipments fell 18.2 percent compared to the previous quarter.
This is unfortunate as notebook drive purchases are set to exceed desktop drive purchases by 2011. Seagate does not want to be behind the curve in this fast-growing market.
Why is Seagate late to market in notebook drive capacity levels?
The company denied that it was due to a deficit in its areal densities. Although Western Digital's 320GB drive has 160GB per platter and the Momentous 5400.4 only 125GB this is not due to Seagate's inability to attain high areal density levels generally.
COO David Wickersham said in a financial results call: "it’s not an areal density efficiency. That’s why I pointed out that the same areal density on the 3.5-inch versus the 125 and 2.5-inch notebook that you described is in fact the one that Seagate was first to market in very, very high volume."
In other words, Seagate has the requisite areal density capability and applied it in the 3.5-inch drive space but not in the 2.5-inch market. Why was that?
CEO Bill Watkins said: "... the issue really started, we came off of last year’s March quarter - and I’ve got no one to blame but myself here - is I went into full cut-back mode. We killed the 250 program. We felt that we had enough areal density leadership. We didn’t need it so we killed it and we spent a lot of churn during that April/May/June really looking at a whole different plan and cutting back, thinking that we are going to be in a significant price war."
By the time summer 2007 was coming to a close Watkins and his team realised that they had misjudged. Competitors had not been content with 250GB and moved on to 160GB platters.
Seagate changed and realised it had to catch up. It chose to first of all to revitalise the 250GB Momentus programme. Watkins said: "... as July came about, Dave and team put a lot of resources into this and you can see in the extra spending in R&D, get the people there and get the thing caught up."
"But at the end of the day, I mean, this is one of these issues where I’ve got no one to blame but myself and how we were kind of addressing and the churn we created in this organisation."
"... I pulled this thing back way too far and I’m paying the consequences and really thankful to the team that they really got their act together and are catching up two notebook programs simultaneously."
Two programmes? The 320GB level has also got to be reached. Wickersham said: "... when do we follow-up on that to the 160 2.5-inch notebook capacity point? We will begin to ship CTU (customer test units) units this quarter and ramp that to production next quarter."
We can expect a 320GB Momentus 5400.5 product to be announced around May and June. Wickersham acknowledged that: "we will be clearly behind on the 160 per platter on the notebook," meaning that Seagate will be trying to properly catch up with the next 2.5-inch capacity point, expected to be 500GB.
It is conceivable that Toshiba or Western Digital could announce such half terabyte 2.5-inch drives by the end of this year.
The 250GB Momentus is a fast-performing drive and has low power consumption when compared to other 2560GB drives. It is a high-class product but, undeniably, it is late to market.
We might expect Seagate to announce a 5400.6 500GB Momentus in the calendar Q1/2 period next year. It could conceivably be earlier. Wickersham said: "I would say it’s going to be competitive for the next platform on the notebook but we expect to be there and be time-to-market, if not very, very close."
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