Seagate Case
Seagate Technology Buyout
Hard disk drives make up the largest sector of the information storage industry in 1999. The hard disk drive market can be classified into three separate categories, desktop, enterprise, and mobile. The mobile and desktop markets are expected to converge in the long run. While the desktop market represents approximately 58% of the $25 billion total hard disk drive market, enterprise margins were nearly double the margins in the desktop sector (10-15%). Since 1997, the number of disk drive units sold has grown while prices have dropped dramatically, causing overall revenues to decline. This situation is expected to continue, with revenue growth lagging far behind unit growth due to the vigorous competition between disk drive manufacturers.
Growth Opportunities
One identified growth opportunity within the disk drive industry is storage networking, which provides disk drive manufacturers the ability to differentiate their products. The other identified growth opportunity is within the consumer electronics market. While only projected to have sales of $0.5 billion in 2000, the consumer electronics market is expected to grow over 50% annually over the next three years.
About Seagate
Founded in 1979, Seagate Technology, Inc. is the market leading manufacturer of computer hard drives, owning 21.1% of the total disk drive market in 1999, an industry where six companies account for 95% of sales. Seagate also had the largest market share of the Enterprise (41%) and Desktop (21.1%) disk drive market sectors in 1999.
In May 1999, Seagate sold its Network & Storage Management Group to VERITAS Software Corporation, an independent manufacturer of storage management systems, for approximately 155 million shares of VERITAS stock. With an ownership stake of over 40%, Seagate became VERITAS' largest stockholder. From June 1999 through November 1999, Seagate's stock price increased by 25%, while VERITAS' stock price increased by over 200%. This
Hard disk drives make up the largest sector of the information storage industry in 1999. The hard disk drive market can be classified into three separate categories, desktop, enterprise, and mobile. The mobile and desktop markets are expected to converge in the long run. While the desktop market represents approximately 58% of the $25 billion total hard disk drive market, enterprise margins were nearly double the margins in the desktop sector (10-15%). Since 1997, the number of disk drive units sold has grown while prices have dropped dramatically, causing overall revenues to decline. This situation is expected to continue, with revenue growth lagging far behind unit growth due to the vigorous competition between disk drive manufacturers.
Growth Opportunities
One identified growth opportunity within the disk drive industry is storage networking, which provides disk drive manufacturers the ability to differentiate their products. The other identified growth opportunity is within the consumer electronics market. While only projected to have sales of $0.5 billion in 2000, the consumer electronics market is expected to grow over 50% annually over the next three years.
About Seagate
Founded in 1979, Seagate Technology, Inc. is the market leading manufacturer of computer hard drives, owning 21.1% of the total disk drive market in 1999, an industry where six companies account for 95% of sales. Seagate also had the largest market share of the Enterprise (41%) and Desktop (21.1%) disk drive market sectors in 1999.
In May 1999, Seagate sold its Network & Storage Management Group to VERITAS Software Corporation, an independent manufacturer of storage management systems, for approximately 155 million shares of VERITAS stock. With an ownership stake of over 40%, Seagate became VERITAS' largest stockholder. From June 1999 through November 1999, Seagate's stock price increased by 25%, while VERITAS' stock price increased by over 200%. This