Seagate said Tuesday that the notebook disk drive market had almost completely recovered from the effects of a disastrous flood last year that constrained disk-drive shipments.
In addition, the mission-critical market for hard drives has also almost fully recovered, Seagate executives said during a conference call.
The problem for Seagate: a recovery is almost bad news for the company. In February, analysts noted that hard-drive prices were up almost 28 percent, and the short supply of hard drives has meant that Seagate's profits have soared as the company brings its production up to speed.
Catastrophic floods swept through Thailand last summer and fall, burying manufacturing equipment needed to assemble the components used by the drives under water and silt. Apple, Canon, and Nikon were affected to a lesser extent, and concerns were raised that the drive shortages could cause a ripple effect on the PC supply chain. So far, however, that hasn't happened, at least among top-tier suppliers.
On Tuesday, Seagate said that its net income was over 4.5 times higher than the same period a year ago, reaching $1.84 billion. Revenue also increased 165 percent versus April 2011 to $4.45 billion, thanks in part to the integration of Samsung's disk-drive business. Samsung-labeled products contributed 13 percent of the 61 million drives that Seagate shipped, up 29 percent from a quarter ago.
Seagate chief executive Steve Luczo reported that the notebook disk-drive market was almost fully recovered, with the market for desktop drives to remain constrained, most likely through the fall, he said. Within the enterprise category, mission-critical drives have recovered, while business-critical drives remain constrained, Luczo said, according to Seeking Alpha.
Seagate also shipped drives at an average capacity of about 15 percent higher than its competition, meaning that the increased production was also accompanied by a higher price per drive.
Seagate, for its part, struck long-term agreements with OEMs to ensure them a steady supply of drives at favorable prices to Seagate. Luczo also told analysts that the Seagate has and will continue to hold auctions of disk drives, all of which sold out at higher-than average prices.
"What we've noticed is the LTA customers seem to be taking share and what's really interesting is the LTA customers with the longer-term LTAs seem to be even taking more share," Luczo said. "And that may be a function of their ability to do some longer-range planning knowing that they have the supply available, particularly in some of these product categories where Seagate is a sole supplier and is likely to be a sole supplier for anywhere up to 12 to 18 months."
The combination of improved production and higher prices has meant soaring profits for Seagate.
"Seagate delivered strong performance this quarter by concentrating our efforts toward supporting our customers as the recovery of the hard drive industry continues to progress," Luczo said in a statement. "Importantly, during this challenging period, Seagate has successfully transitioned its portfolio to industry-leading products across all markets thereby positioning the company for continued leadership through operational excellence."
Luczo predicted that Seagate would maintain a market share of about 43 percent for the June quarter, with a total available market of about 160 million units across the entire drive industry. In December, the TAM should be about 185 million units, Luczo said.
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