The new forecast calls for companies and governments to spend a combined $3.8 trillion on information technology, which would amount to growth of 3.7 percent from 2011. The previous forecast had called for growth of 4.6 percent.

For perspective, the difference on a dollar basis is about $100 billion, which is certainly real money, but when you consider the various puts and takes affecting the projected spend, it makes a certain amount of sense.

Gartner says that all four of the major technology sectors it tracks — computing hardware, enterprise software, IT services, and telecom equipment and services — will see their growth rates slow this year.

You can probably guess why: The uncertain global economy, the euro zone sovereign debt crisis and the disruptions on the hardware supply chain from last year’s flooding in Thailand on hard-drive production have all teamed up to perform a triple whammy on the tech sector. The Thailand problem will probably last until well into 2013, Gartner’s Richard Gordon says in a statement, echoing what Seagate CEO Steve Luczo told AllThingsD in an interview in November.

Telecom equipment spending will probably suffer the least, Gartner says. Sales in that sector will grow by nearly 7 percent to $475 billion, followed by the enterprise software market, which will grow by 6.4 percent to $285 billion. The chart at the right, which I screengrabbed from Gartner’s handout, breaks down the revised outlook by each sector versus what the previous growth outlook had been.

Gartner also trimmed its average annual growth projection for IT spending through 2015. It now expects spending to grow by about 5 percent on average, down only slightly from 5.4 percent, but in the wider scope of a few trillion dollars, a fractional change still amounts to hundreds of billions of dollars.

Global sales of semiconductors were $25.1 billion in November, representing a decrease of 2.4 percent from October. On a year-to-date basis, global chip sales were up by 0.8 percent versus the same time in 2010.

Last month, Intel slashed its sales outlook by $1 billion on concerns that effects of floods in Thailand would impact demand for PCs, and thus for its microprocessors. The flooding has caused what’s being described as the most significant supply chain disruption to the PC and server industry in a generation.

SIA President Brian Toohey described the disruption as a near-term problem. “Supply chain disruptions resulting from the floods in Thailand have impacted semiconductor sales in the near term, however OEMs” — PC and other electronics manufacturers — “are expected to recover production losses over the course of the next few months,” he said in a statement.

“November sales were additionally affected by the continuing European financial crisis which is having a broad impact on other economies and global demand,” he said. The impact from Europe is especially clear in the 11.5 percent drop in sales to that region, which you can see in the chart below, a screen-grab from the SIA’s press release.

(Image credit: iStockphoto | V777999)

The country is now beginning the arduous job of cleaning up from the floods that killed upwards of 600 people and dealt a body blow to its industrial and manufacturing base.

One industry hit especially hard is the computer business. The world relies on factories in Thailand to turn out critical components used to build hard drives, and factories there are out of commission for now. This is not a trivial problem — the factories in question are not easy to replace, retool and restart once they dry out. Nor is the answer simply for the hard drive manufacturers to build new factories somewhere outside the flood zone.

This is the kind of supply chain disruption that the computer industry hasn’t seen in many years. I had a chance to talk with Steve Luczo, the CEO of Seagate Technology, for his view of the situation. Seagate has been relatively lucky in that its factories haven’t been directly impacted like those of Western Digital and Toshiba. But many companies that supply Seagate with necessary components have been hit, and it will be some time before they’re back on their feet.

Luczo told me that the computer industry as a whole — including companies who make PCs, servers, workstations and any other device that contains a hard drive, whether a set-top box or an enterprise storage device — can expect acute supply-chain disruptions to last well into 2012, and that it will take until the end of 2013 for the industry to return to its pre-flood operating posture. You read that right: It will be two years before the supply of hard drives is anywhere near “back to normal,” and there are simply no easy solutions for getting it fixed.

An estimate by the market research firm IHS iSuppli pegs the available supply at 125 million units, which is about 29 percent short of demand of 175 million units. By its reckoning, more than one-quarter of the world’s hard drive manufacturing capacity has been disrupted in one way or another, including 45 percent of the capacity devoted to making hard drives for personal computers. I spoke with Luczo by phone yesterday, and tossed in an extra eighth question because of the importance of the subject.

AllThingsD: Steve, at a high level, I think everyone understands the problem. There’s been a terrible flood in Thailand, and a lot of factories that make crucial parts for hard drives are out of commission. To that end, I think people expect this to be a temporary problem that works itself out in a couple of months. But you say it’s a much more complex problem than most people realize. You’re tracking this situation day to day, and probably hour by hour. So, how bad is it, really? And what’s likely to happen?

Luczo: What’s surprising to us is that even with all the data out there — we’re six weeks into it — there are a lot of fairly sophisticated companies that haven’t fully come to grips with the depth of the problem and the duration that is likely to occur. What is going to happen in the next couple of weeks is that the real shortage begins to show up right about now. There was already a lot of built inventory and a lot of finished goods moving through the system. And now all that is gone, and I think customers are starting to see shelves of parts go empty, and realizing that they’re not going to be filled for anywhere from one to two months. So the concern is heightened.

We heard Meg Whitman talk about this on HP’s earnings call Monday. She said HP stepped in and started doing some strategic buying. She says HP is going to see effects at least through the first half of next year. Apple talked about it on its earnings conference call, too. Are you hearing from them?

Tim Cook at Apple was way in front of this. I saw Tim the first week it happened, and took him through the situation, and in 15 minutes he understood the magnitude of it. Meg was on the second week of her job as CEO when I went to see her, and she got it right away. HP’s procurement VP, Tony Prophet, was also early to understand this. Companies like that reached out to us early on, because they understood that this is going to be an extended problem. They started asking for longer supply agreements. Deals that would typically last about a year, they’re now asking for two years.

How bad is it really going to be? What’s your outlier worst-case scenario, and then what do you think is a little more realistic?

If you think pre-flood, a mix [of products] that the customers need, the industry had the capacity to ship about 190 million units a quarter. Pre-flood, we expected the demand to be pretty consistent at about 180 million a quarter, with a bump in September 2012 for Windows 8. We now believe the March quarter is going to much more difficult than the December quarter, and December is going to be about 120 million or so. We think the March quarter will be about 120 million, in the best-case scenario. And that’s with customers mixing down pretty aggressively; and by that, I mean companies like Western Digital, who don’t have access to the sliders [a critical component in a drive], are shipping one- and two-headed devices so they can ship more units. So instead of shipping a drive that contains two disks and four heads, which is what the market needs right now, they’ll be shipping a one-disk, one-head or one-desk, two-head product. They’ll be maximizing the units they can sell, rather than shipping the product the customer actually needs. … So we see something like 130 million for March on the optimistic side, and then 150 million for June, 170 for September and then 190 million for December. And so by the end of 2012 you’re back to being close to industry demand. But even then, you’ve not included the impact of that missed 100 million units. And that will take another year to absorb, because it’s not like the industry is building new factories to chase that demand. We can’t over-invest to meet some bubble and then get stuck with excess capacity.

I think, intuitively, people expected companies like Seagate to just build more factories outside of the flood zone, but it’s not that simple, is it? Would this not be a moment to add capacity?

There are some in the investment community who think that’s what is going to happen, and that there will end up being a supply glut after all this is over, but it’s not the case. For us, it’s more a function of how to recover the supply chain and then work with the customer to get a good read on what their needs are for the next several quarters. If we see a multiquarter shortage that goes beyond what I described before, then we would think about maybe putting some capital in place. But we’re not going to do that to solve a temporary problem, because we end up being stuck with the excess capacity. Now if it turns out there is no recovery, and then the industry is more constrained than I first described — and that, by June, the industry is still 30-40 million units short and looks like it will be for the next six quarters — we might revisit. But then we’d want longer-term commitments to make sure we’re not overinvesting. But we’re not to that point yet.

What is this doing to prices? And what does that mean to the person who wants to buy a computer or server this year or next year?

If you look at a 10-year moving average trend, the industry has in general seen prices come down about 2 to 3 percent a quarter, and that is for a particular product. In 2009, there was a little price erosion, and that was because the storage industry recovered quickly from the recession. And there had been massive capital cutbacks, so there were big shortfalls through all of 2009 and into 2010. Then, when the Greece crisis happened, that put a big flatline on a lot of growth, and the industry had put in a lot of capital because everyone expected there would be growth. So, since spring of 2010, the price erosion has been higher than normal, which would show that supply is greater than demand. And what this flood has done is drive the supply curve down, while the demand curve has stayed constant. For OEMs [original equipment manufacturers, or the PC and server manufacturers like Apple, HP and Dell, who buy directly from Seagate], you’re seeing an average increase of about 20 percent, and in the channel [resellers who sell parts to smaller PC and server vendors], probably much higher. So all the sensational quotes you see about pricing are about those that occur in the channel, where we have no control whatsoever.

The markups in the channel are much higher? Are the channel guys taking advantage of this?

Yes, they’re higher, but I don’t think they’re taking advantage. I’ve heard stories about drives that we sell to OEMs for $60 that show up in the channel at $105. Normally the channel price is within about 10 percent of the OEM price. It’s just the law of supply and demand. They can’t get supply. The channel is getting about a third, at most, of the supply they would typically get. The OEMs are the ones with the supply agreements, so everyone in the channel is way short. In some market segments, supply is about 70 percent below what the demand is. And so those shortages are very acute. The channel is selling the few drives that are out there to whoever needs them the most and is willing to pay for them.

So what does all this mean for Seagate, specifically?

For us it’s a different story, because we’re going to be driving more volume than our competitors, because we’re not as directly affected, and we’re going to be making some  technology transitions. When we do that, it lets us take cost out of our product, so we can offer more capacity for the same or fewer parts. That helps us drive down pricing. Our goal is to recapture some of the more aggressive pricing of the last eight quarters, in order to sort of get our business back in balance. Our long-term business model calls for gross margins of 22 to 26 percent. And we use our manufacturing expertise to drive down our costs and then pass that on to our customers. This quarter, end users really won’t see it, because product has been built and has been on the shelves. As the shortages just started occurring, you’re starting to see prices increase in the channel. And then at the OEM there will be shortages in some high-value areas like enterprise storage or cloud computing. You’re going to have to see price increases, because there’s such big shortages.

One thing that occurred to me when I first wrote about this a month or so ago is that it represents an opportunity for the flash memory chip companies to make some inroads against hard-drive guys like you, mainly on notebooks. Is there a threat that flash could pick up some of the demand?

Some of it, but not very much. I think to the extent that there is a high value purchaser who can afford to pay $200 for 100 gigabytes, then that market will expand from 1-2 percent to 3-4 percent. Of the 35 to 40 percent shortage that exists, could you see a little of that get absorbed by silicon? The answer is yes. But there’s a cap. There’s just not enough of a raw supply of silicon to meet all the demand. Our industry will ship 400 exabytes this year. We would have shipped 450, were it not for the floods. Of that, 180 exabytes is notebooks. Reduce that by 30 percent, and you get about 55 or 60 exabytes. If you were to take all of the capacity from Samsung’s newest state-of-the-art flash factory, and dedicated it just to notebooks, it would only put out 7 exabytes a year. Plus, there are already other markets demanding flash, like  tablets and cellphones and other things. So it’s not like you can steal from those other markets. You’re not going to take a $32 product and replace it with a $350 product. Can you do it at the edges of the market? Sure. But the threat is capped by the amount of silicon available and the price point for flash storage, which is still an order of magnitude higher.

Full details of the dispute have never been disclosed, because the matter has, so far, been kept confidential. So it’s tough to tell what’s really going on here. But the end result is obviously unpleasant business for Western Digital, which is now on the hook for a half-billion dollars in damages, at a time when it is still reeling from the devastating floods in Thailand.

Of course, the battle is far from over. Western Digital plans to appeal the ruling. “We do not believe there is any basis in law or fact for the damage award of the arbitrator,” CEO John Coyne said in a statement. “We believe the company acted properly at all times and we will vigorously challenge the award.”

Western Digital CEO John Coyne warned yesterday on a conference call with analysts that the company expects significant impact to its hard-drive manufacturing operations in that country. It is one of several tech companies that has suspended operations in Thailand amid the worst flooding there in a half century.

Seagate, which reported earnings yesterday, also has operations in Thailand and said those are running at full capacity, but that some of its component suppliers have been affected by the floods.

“Given the severity of the situation and the extensive supply constraints caused by the disruption … the effects on our industry are likely to be substantial and will extend over multiple quarters,” Seagate said in a statement.

With the prospect of an industrywide shortage of hard drives affecting one vendor but not the other, shares of Seagate today shot up by $3.36, or more than 27 percent, to $15.42; Western Digital fell nearly 10 percent yesterday, but recovered today.

I checked in with Fang Zhang, who tracks storage for IHS iSuppli, the research firm that covers the electronics supply chain. While it’s too early yet to know the full impact, her initial estimate says that the worldwide production of hard drives will drop by about 30 percent, from 176 million units projected pre-flood to 125 million drives in the fourth quarter.

Apple CEO Tim Cook addressed the potential for a shortage on Apple’s earnings call with analysts on Tuesday because, naturally, it will affect his ability to turn out Macs this quarter and probably into next year. “I’m virtually certain there will be an overall industry shortage of disk drives as a result of the disaster,” he said.

One question I have is whether this could turn out to be an opportunity for the solid-state storage companies — the main supplier that comes to mind here is Samsung — that are popularizing flash-memory based storage drives in PCs like the MacBook Air and other machines. Will they boost production to fill that gap?

(Image via Consumer Queen.)

But given the widespread adoption of tablets like Apple’s iPad, coupled with everyone under the sun vying for a piece of the tablet market, it’s easy to see that consumption of content will continue to explode. And that’s the point — with that explosion comes the aftershock of storage demand. As more users adopt tablets as mainstream, more storage from hard drives will be needed from the backend servers and in the cloud to serve them. So while flash is appealing for use in consumption devices like tablets, let’s not let this obscure the main fact about tablets in the big picture of the storage market, which is that tablets aren’t hurting hard drive sales — in fact, they are helping.

When examining the storage market, we can look at present and future projections for HDD unit sales and by volume of capacity (in petabytes) shipped as per the chart below:

But we can also look at the data trends for consumption. In 2005, the world generated 150 exabytes (one billion gigabytes) of data. This year, it’s estimated that we’ll create and store 1,200 exabytes, and in 2020, a staggering 35,000 exabytes!¹ That’s 30x growth over the next 10 years.

This isn’t the first time that we’ve heard in the HDD world that the sky is falling. About a decade ago, MP3 player manufacturers shrank the device footprint and switched from hard drive storage to flash. Not long after, smartphones came on the scene, and those in the know posted that users would discard their PCs in favor of smartphones and, again, the hard drive industry would suffer. But the sky never fell, and neither MP3 players nor smartphones caused hard drive sales to decline. In fact, sales actually grew 14 percent between 2000 and 2005, and continued to grow 12 percent from 2005 to 2010.¹ The reality is that the more content consumption devices hit the market, the greater the demand for hard drive storage capacity, even when it is not local to the device.

Now let’s delve into some logic. Consumers didn’t discard their PCs for smartphones, and they aren’t going to chuck their PCs for tablets — the devices just aren’t that interchangeable. People are using their tablets for content consumption: to watch movies, browse the Internet, check email, play games, etc. But they aren’t really using their tablets for content creation, and certainly don’t rely on them for heavy duty applications. So logically, it follows that most people who own a tablet need a PC as well.

But just for argument’s sake, let’s assume users worldwide tossed out their PCs and replaced them with tablets. Right out of the gate, we would have a capacity problem. The bottom line is that all the flash in the world isn’t close to enough to meet the worldwide need for storage capacity, and that fact will remain true for a very, very long time. Here are some numbers to consider: In 2010, all the content created and replicated grew past a staggering zettabyte (one trillion gigabytes), and is expected to reach 1.8 zettabytes in 2011. Yet in 2010, the entire NAND flash memory industry manufactured just over 11 exabytes (you would need 1000 exabytes to equal every one zettabyte) of storage. Even with forecasts predicting that NAND flash production capacity will grow to 21 exabytes in 2011, only nine percent of that, or about two exabytes, will go to the flash memory used in tablets.² That’s not nearly enough capacity to meet demand.

Tablets with flash storage simply don’t have the onboard capacity to store the massive volumes of digital content that users want to access — anytime, anywhere. So all that data needs to be stored externally, in either local attached, networked or cloud storage — and all those formats rely on hard drives. So, once again, tablet popularity doesn’t hurt hard drive sales. In fact, some pundits see tablets as a net gain for hard drives: “For now, IDC sees the rise in demand for iPads/tablets as additive … for HDD makers in terms of the growth of information and digital content that has to be stored somewhere. That content and information consumed by these devices most likely will be stored on hard disk drives in data centers, cloud infrastructures, or on USB or network-attached personal storage devices in homes.”³

So in the end, even if some users do opt to replace their PCs with tablets, hard drives will still be in high demand. Content will continue its growth and storage will always be needed. Because nobody is saying worldwide demand for storage capacity is decreasing. Now that would be an ugly rumor!

Mark Wojtasiak is a Senior Manager in Product Marketing with Seagate Technology. For the past 5 years, Mark has been based in Seagate’s Shakopee, MN, design center where Seagate lives and breathes enterprise storage. Though Mark works in the middle of everything enterprise, his role at Seagate enables him to listen, learn, discuss, and share anything and everything related to storage. From the traditional desktop to external drives to the cloud, he develops insights on the latest storage technology, trends, customers, and users.

^{1 IDC Digital Universe Study, June 2011}

^{2 Gartner, Forecast: NAND Flash Supply and Demand, Worldwide, 1Q10-4Q12, 3Q11 Update, page 2, Table 15-3, September 2011}

^{3 http://storageeffect.media.seagate.com/2010/11/storage-effect/a-tablet-with-a-side-of-storage-please/}

Yesterday, David Einhorn of Greenlight Capital dumped his bid to buy the New York Mets.

“I am disappointed to announce that I will not be purchasing an ownership interest in the New York Mets baseball team at this time,” said the well-known Wall Street hedge fund manager in a statement.

Why does that matter to tech? Well, because Einhorn has been an active player in the sector of late, including buying and then dumping a big chunk of stock in Yahoo earlier this year.

He currently owns slugs of Seagate, Apple, Best Buy and, in his largest holding, almost 15 million shares of Microsoft.

Now, it will be interesting to see if he’ll put his proverbial eye back on the ball of attacking the company’s CEO Steve Ballmer, as he had been doing many months ago.

While also maintaining that the stock was undervalued by investors, for example, Einhorn said in May that the software giant had “Charlie Brown management” and that Ballmer’s “continued presence is the biggest overhang on Microsoft’s stock.”

That did not stop Greenlight from adding more Microsoft shares to its holdings, jumping to an ownership stake of 14.8 million shares as of June 30, compared to 9.1 million shares at the end of the previous quarter.

Now that he has more time on his hands post-Mets, will Einhorn renew his Ballmer criticism?

We’ll see soon enough, as well as what Microsoft’s own outlook is, at its annual Financial Analyst Meeting later this month in Anaheim.

Ballmer, as well as a panoply of other Microsoft execs, will be making presentations there.

You can get apps that allow tablets to access files you’ve stored in the cloud on services like Dropbox or SugarSync, but these require an Internet connection and can be slow.

Now, two companies are coming out with small, portable, companion hard disks that massively increase the storage capacity of tablets. And because most tablets lack USB connectors, these external hard disks stream their content to the tablets over a special, local Wi-Fi network they create. No Internet access is required. The content remains on the external device, though you can download files to the tablet’s own memory for permanent storage there.

I’ve been testing the first of these gadgets to emerge. It’s from Seagate Technology, the big hard-disk company, and is called the GoFlex Satellite. It costs $200, and holds 500 gigabytes of data, far more than the 64 gigabytes that is the maximum on typical current tablets.

It was initially designed for use with Apple’s iPad, though it also works on Android tablets, as well as on iPhones and Android smartphones. It works best with a special iPad or iPhone app you install, though it will operate through the Web browser on Apple and Android devices.

In my tests, the Satellite basically did its job, smoothly and rapidly streaming movies, songs, pictures and documents to an iPad and other devices. It is battery-powered, so you can carry it around with your iPad, or leave it plugged in for longer use, as long as the iPad remains within about 150 feet. It isn’t tiny—about 5 by 3.5 by 1.25 inches, and just over half a pound—but it’s quite portable. It can stream different content to up to three devices simultaneously.

The portable GoFlex Satellite can stream different content to up to three devices.

However, the Satellite has some drawbacks and trade-offs. The main trade-off is that, while you are connected to it via Wi-Fi for streaming, your iPad or other device can’t access the Internet, so you’re cut off from things like email, Web browsing and social networks. If you launch the Web browser while connected wirelessly to the Satellite, it just brings up the Satellite’s menu of files, regardless of what website you type in.

In addition, both the companion app and the Web-browser-interface display, while attractive and simple, can be clumsy to use. It is awkward to play photo slideshows or to listen to multiple songs in a row. And the Wi-Fi connection dropped several times, even when the iPad and the Satellite were located very near each other.

The GoFlex Satellite

For me, the battery life fell short of the company’s five-hour claim.

The Satellite’s main competitor, due out later this month, is called the G-Connect, from Hitachi. Like the Seagate offering, it costs $200, holds 500 gigabytes of content, and is initially designed for the iPad and iPhone. Unlike the Satellite, it has no internal battery, though it will accept external batteries made for the iPad.

Also, unlike the Satellite, it allows simultaneous media streaming to an iPad and Internet connectivity, though only when the G-Connect is hooked up to a wired Internet connection via its Ethernet jack. I wasn’t able to test the G-Connect, so I can’t say how well it will work.

A third contender in this category, the Wi-Drive from Kingston Technology, is a bit different. While it has an internal battery and uses Wi-Fi to stream content, it has no hard disk and uses only memory chips. Thus, it has much less capacity than the other two, and doesn’t add much storage to a tablet—only up to 32 gigabytes extra. It isn’t yet available, according to the company’s website, which also lists no prices, and I didn’t test it.

So, how do you get content into the Satellite so you can use it on your iPad or other tablet?

First you plug it into a USB port on your PC or Mac. Then, you have two choices. You can either drag whatever files you want manually to the drive. Or, you can use free software that syncs music, video and photos. This software can be set to fetch only content that is playable on your particular device.

Using both methods, I moved 55 videos (including two feature films), more than 2,000 photos, about 1,700 songs and nearly 200 Microsoft Office and Adobe PDF documents to the Satellite, some from a Mac and some from a Windows machine. Using the sync software, the process was surprisingly fast, and this content took up less than 20% of the drive’s capacity.

All the content showed up as promised on my iPad in both the special app and in the Web browser. I also tested it on an iPhone, where both the app and browser display also gave me access to the content via wireless streaming.

I tried it on two different Android tablets, where the content showed up and played fine via the browser. In addition, I tested a pre-release version of the Android app—almost identical to the iPad app—and it, too, worked as promised.

However, while the Satellite’s app and browser display are clean and well-organized, I found them annoying in some respects.

For one thing, they lack simple slideshow, playlist and album features. While playing a group of multiple photos or songs, I couldn’t manually skip or go back.

In addition, the computer-sync software doesn’t allow you to easily select only certain files or to eliminate small files like record album covers or icons, or special, hidden files your computer creates that look like videos, but aren’t. So your file list gets cluttered with dozens of unplayable or unwanted items.

The Satellite’s battery supposedly lasts five hours when continuously streaming videos to one device. But in my tests, I only got about four hours.

Overall, the GoFlex Satellite might be a useful device for iPad or other tablet owners with large media collections. But it needs work.

Write to Walter S. Mossberg at walt.mossberg@wsj.com.

]]> http://allthingsd.com/20110706/the-satellite-extra-storage-for-tablets-on-the-go/feed/ 0 http://allthingsd.com/20110417/samsung-may-sell-hard-disk-drive-unit/ http://allthingsd.com/20110417/samsung-may-sell-hard-disk-drive-unit/#comments Sun, 17 Apr 2011 16:00:08 +0000 Jung-Ah Lee http://voices.allthingsd.com/?p=39029 Samsung Electronics Co. is considering selling its money-losing hard-disk drive business to raise funds for investment in new growth areas, a person familiar with the situation said Sunday.

Samsung is looking to sell the business for $1.5 billion but might consider a deal under $1 billion because it “is trying to get rid of” the business, the person said.

The most likely buyer for the business is Seagate Technology Inc., the U.S.-based computer hard-disk maker, the person said.

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]]> http://allthingsd.com/20110417/samsung-may-sell-hard-disk-drive-unit/feed/ 0 http://allthingsd.com/20110307/western-digital-acquires-hitachi-hard-drive-unit/ http://allthingsd.com/20110307/western-digital-acquires-hitachi-hard-drive-unit/#comments Mon, 07 Mar 2011 16:00:51 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=3759 The number of companies making computer hard drives is dropping by one, as Western Digital–the industry’s largest player–agreed to acquire Hitachi GST, the hard drive unit of the Japanese electronics concern Hitachi for $4.3 billion in cash and stock. Western Digital will pay $3.5 billion in cash and issue 25 million shares to Hitachi, giving it a stake worth about 10 percent of Western Digital’s equity. Steve Milligan, president and chief executive of Hitachi GST, will become Western Digital’s president. Hitachi bought IBM’s hard drive business for $2 billion in 2003. The deal follows an attempt by Western Digital to buy rival Seagate, though, as Bloomberg News reported at the time, the approach failed over concerns that the combination wouldn’t pass muster with antitrust regulators. Seagate also turned down an offer to go private from TPG Capital last year.

]]> http://allthingsd.com/20110307/western-digital-acquires-hitachi-hard-drive-unit/feed/ 0 http://allthingsd.com/20110110/sandisk-seagate-debate-data-storage-future/ http://allthingsd.com/20110110/sandisk-seagate-debate-data-storage-future/#comments Tue, 11 Jan 2011 00:00:40 +0000 Don Clark http://voices.allthingsd.com/?p=35038 Many questions have been raised by consumers’ shifting focus to smartphones and tablet-style PCs. Sanjay Mehrotra seems to like answering them a bit more than Steve Luczo.

Luczo is CEO of Seagate, the big maker of computer disk drives. Mehrotra was recently given the top job at SanDisk, which holds a similarly strong position in the chip-based data-storage medium known as flash memory. They talked about their businesses during separate interviews at the Consumer Electronics Show.

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]]> http://allthingsd.com/20110110/sandisk-seagate-debate-data-storage-future/feed/ 0 http://allthingsd.com/20101230/who-isnt-rambus-suing-at-the-itc/ http://allthingsd.com/20101230/who-isnt-rambus-suing-at-the-itc/#comments Thu, 30 Dec 2010 17:27:46 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=1209 Shares in the perpetual patent litigation machine known as Rambus received a healthy boost yesterday on word that the International Trade Commission had taken up its patent complaint against a litany of technology companies.

Rambus, whose nominal specialty is designing ways for chips to pass data back and forth but which is better known for more than a decade of bitter legal battles, earlier this month filed a complaint with the ITC, saying that products from several companies contained chips that infringe on its patents.

As anyone who’s been paying attention to the numerous patent battles around smartphones knows, the ITC is generally seen as a fast track to a settlement of a patent dispute. Since federal courts are slow and litigation is expensive, companies often go to the ITC ostensibly to block the import of products found to infringe on patents. Since practically every technology product is built outside the U.S., sales of an infringing product can be subject to an exclusion order, the usual outcome when a violation is found.

What’s interesting is the wide range of companies that Rambus has named in its complaint: Hewlett-Packard, Cisco Systems, Nvidia, Broadcom, Seagate, Motorola, Garmin, Asus and Hitachi are among the better known ones. The full list contains 34 companies, including some subsidiaries.

Some of the patents involved in this complaint were the subject of a prior case that Rambus took to the ITC against Nvidia. The commission ruled the patents–known as the Barth family of patents–were valid and issued an exclusion order, prompting Nvidia to come to the table and sign a licensing agreement in August. Rambus is obviously looking for a similar outcome from Broadcom and Freescale, which it says are among those now infringing on the Barth patents.

Additionally there’s another set of patents known as the Dally family, which Rambus didn’t invent but to which it holds a license. The patents are owned by MIT and are based on the work of Bill Dally, a former MIT professor of electrical engineering who’s now at Stanford University. The patents had been licensed exclusively to a small private firm called Velio Communications, where Dally had been CTO and which was acquired by the chip maker LSI Logic in March of 2004.

In a twist that could happen only in the strange world that is patent law, Rambus acquired the exclusive license to Velio’s serial interface patents–the Dally family–in a separate deal in the waning months of 2003. The irony is that LSI is among those being sued for infringing on the Dally patents. Some M&A lawyers at LSI must be kicking themselves today.

]]> http://allthingsd.com/20101230/who-isnt-rambus-suing-at-the-itc/feed/ 0 http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/ http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/#comments Wed, 15 Dec 2010 17:35:46 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=602 The market for microprocessors has reached what market research firm iSuppli is describing as a stalemate in its quarterly survey of market share statistics. Shifts in share are being measured in tenths of a percent between Intel, Advanced Micro Devices and assorted others. Intel gained slightly in the third quarter from the same period last year to 80.1 percent, while Advanced Micro Devices lost a little less than a full percentage point with 11.3 percent. Good news for all concerned: Revenues are up 23 percent overall.

Note that iSuppli counts microprocessors differently than some of the other research firms. Its “other” category includes not only PC chip also-rans like Via Technologies, but also general purpose RISC chips like IBM’s Power chips that go into servers.

There’s better news, however, for the beaten-down hard-drive industry. After seeing shipments decline through the first half of the year, fourth-quarter shipments are up, as are revenues, iSuppli says. It’s clearly the result of the holiday-season demand, but welcome news, especially in light of all the worries that tablets–like Apple’s iPad–which use flash memory for storage, would whack hard-drive sales. (Though, as Digital Daily’s John Paczkowski noted this morning, the hard-drive guys still have lots to fear from tablets.)

Western Digital is holding on to its top spot as the world’s leading supplier, edging out Seagate, which has seen its share of troubles lately.

Seagate failed to come to terms with TPG Capital last month on a plan that would have taken the company private, and also spurned a takeover offer from Western Digital. Last week it moved to refinance more than $2 billion in debt, more than $500 million of which is due before the end of the year, with a combination of bonds and bank loans.

]]> http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/feed/ 0 http://allthingsd.com/20101202/investor-jitters-a-factor-in-failed-seagate-deal/ http://allthingsd.com/20101202/investor-jitters-a-factor-in-failed-seagate-deal/#comments Thu, 02 Dec 2010 21:22:34 +0000 Therese Poletti http://voices.allthingsd.com/?p=33415 A few years ago, former Seagate Technology PLC Chief Executive Bill Watkins made an analogy comparing the hard-disk industry to Rodney Dangerfield.

“I think it’s unfair not to respect a commodity,” Watkins told Newsweek in 2007. “There’s a tremendous amount of technology in this commodity.”

Yet for the most part, investors have given the hard-drive business, with its razor-thin profit margins, short shrift. A valuation debate, plus a nagging fear about the potential obsolescence of hard disks, may have been the two biggest factors in Seagate’s failure to reach a deal to go private.

Most analysts, however, believe that the deal collapsed purely over price.

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]]> http://allthingsd.com/20101202/investor-jitters-a-factor-in-failed-seagate-deal/feed/ 0 http://allthingsd.com/20101129/seagate-not-going-private-after-all/ http://allthingsd.com/20101129/seagate-not-going-private-after-all/#comments Mon, 29 Nov 2010 21:32:36 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=53270 Looks like it’s a buyback, not a buyout for Seagate.

The hard drive manufacturer today said it’s ended talks around that “going private transaction” it announced back in October, opting instead to begin a $2 billion buyback of its stock. Seems Seagate found it couldn’t command a price “in the best interest of the company and its shareholders” and was better off staying its present course.

“We appreciate the interest shown by the private equity firms and our dialogues with them were extensive and thoughtful,” Seagate CEO Steve Luczo said in a statement. “However, management and the Board have chosen to cease discussions concerning a private equity-led leveraged buyout. Given the strong debt markets, improving business conditions and other financing options, Seagate has initiated a plan to further optimize its capital structure to maximize shareholder returns.”

Sounds wonderful, but the company’s shareholders aren’t buying it. Seagate’s stock is down 6.2 percent at $13 as I write this.

]]> http://allthingsd.com/20101129/seagate-not-going-private-after-all/feed/ 0 http://allthingsd.com/20101029/seagate-buyout-talks-live-financing-in-place-n-y-post-says/ http://allthingsd.com/20101029/seagate-buyout-talks-live-financing-in-place-n-y-post-says/#comments Fri, 29 Oct 2010 16:09:16 +0000 Eric Savitz http://voices.allthingsd.com/?p=31769 Seagate shares are getting a boost this morning from an upbeat story in the New York Post on the prospects for talks on taking the company private.

Yesterday, the stock took a hit on a report that talks had collapsed. That was followed by multiple reports that KKR was likely to drop out of a group that has been discussing making an offer for the disk-drive maker.

The Post says that TPG Capital has brought in a new partner–which it didn’t name–to replace KKR in the contemplated joint bid, asserting that “TPG is still very much in talks to take the business private.”

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]]> http://allthingsd.com/20101029/seagate-buyout-talks-live-financing-in-place-n-y-post-says/feed/ 0 http://allthingsd.com/20100505/seagate-once-again-tries-to-get-people-to-back-up-their-data/ http://allthingsd.com/20100505/seagate-once-again-tries-to-get-people-to-back-up-their-data/#comments Wed, 05 May 2010 12:00:58 +0000 Don Clark http://voices.allthingsd.com/?p=24660 Making backup copies of important data is like using dental floss–everybody knows they should do it more often, since not doing it can lead to catastrophe. Seagate Technology (STX) is trying to remove some of the excuses.

The disk drive giant, as part of an overhaul of its retail product line, is introducing new data-storage products that require a little less thought on the part of consumers–and a little less familiarity with some of the compatibility issues that should have been eradicated long ago.

People buying drives, for example, have typically needed to understand the formats that the devices use in talking to PCs and other products. Those formats are associated with different data-transfer speeds, as well as sockets and cable connectors for hooking gadgets together.

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]]> http://allthingsd.com/20100505/seagate-once-again-tries-to-get-people-to-back-up-their-data/feed/ 0 http://allthingsd.com/20100223/pogoplug-cloud-storage/ http://allthingsd.com/20100223/pogoplug-cloud-storage/#comments Tue, 23 Feb 2010 21:35:34 +0000 Katherine Boehret http://solution.allthingsd.com/?p=1077 Ask anyone in the technology industry to talk about trends and “the cloud” is sure to come up in conversation. The cloud is a hip way of describing Web-accessible storage, and whether people know it or not, they’re using this more each day. Social networks save account information in the cloud. Photo-sharing sites store images in the cloud. Web-based email programs keep messages in the cloud. People also are starting to back up the contents of their computers to the cloud, which makes files accessible from almost anywhere using an Internet connection.

Not everyone is gung-ho about storing personal data somewhere other than on their own PC. They might wonder who else can access the cloud’s contents and if the cloud is a truly reliable option for storage.

This week I tested Pogoplug (pogoplug.com), a $129 solution that lets people back up their digital files and access them via a Web browser, or mobile devices. It streams content through the cloud (Pogoplug servers), but never actually stores anything in the cloud. People keep their content on their own hard drive—the Pogoplug lets them access it elsewhere via the cloud.

For the most part, Pogoplug works like a charm. One downside is that files can be a bit slower to open from remote computers or mobile devices than on computers within the same network as the Pogoplug. But its single best attribute is its ability to do the job without trying to tell you every smart thing it’s doing in the background.

Unique Model

Pogoplug comes from San Francisco-based Cloud Engines Inc. and its business model is unlike other cloud-storage solutions. Pogoplug users pay upfront for the device and a hard drive of their choice, which is the storage device, and they never pay again. Other services store content in the cloud, making for faster remote access to files. But these services charge users monthly or annually for storage. ZumoDrive offers 2 gigabytes of storage free but charges annual fees ranging from $30 for 10 gigabytes to $800 for 500 gigabytes. SugarSync, a cloud-based synching program, also offers a free 2-gigabyte program, but charges from $50 to $250 a year for 30 to 250 gigabytes.

Pogoplug uses in-home storage with through-the-cloud access.

Cloud Engines sent me a hard drive for my testing: Seagate’s (STX) FreeAgent Go with 250 gigabytes of storage. This little rectangle costs $90 on Seagate.com or $69 on Amazon.com (AMZN), bringing my Pogoplug set-up total to $200. This is $180 less than just one year of ZumoDrive’s 200-gigabyte plan, or $50 less than SugarSync’s one-year, 250-gigabyte plan.

The Pogoplug is a white box with an electric pink strip running down one side and its underbelly. Three cables attach to it and run out to the wall socket, a router and whatever storage you choose (a hard drive or a small thumb drive). Each Pogoplug has four USB ports, allowing four hard drives or several USB hubs with additional USB ports to connect to the gadget at once.

A Mini Computer

The Pogoplug runs as a mini computer with its own processor that sends files out to the cloud for streaming whenever you want to see them. It creates thumbnails of photos and organizes media, making it easier to find on the my.pogoplug.com Web site. And Pogoplug also uses advanced networking to create a secure connection so people with firewalls and extra secure network settings can leave them just as they are.

Setting up Pogoplug is as simple as plugging in its three cords and pairing it with a computer. I shared with the Pogoplug at least 100 files from a Windows 7 PC and a MacBook Pro. I also set sharing to synchronize with Pogoplug whenever new files were added to designated files on my computers. All of this content was stored on the Seagate hard drive and neatly displayed on my.pogoplug.com.

Hunting for Files

This Web site looks sort of like a bare-bones version of iTunes. Three sections on the left—My Media; Show My Files (sorted into today, last week, last month, those I shared and those shared with me); and My Library—opened content in a large panel. Options at the bottom of the screen changed the way this content was displayed, and a search box enabled hunting through all types of files for specific words. I tried “snow” and found many results, thanks to photos taken of the recent storms in Washington, D.C.

Each file saved to Pogoplug is represented by a thumbnail image on the Web site and can be downloaded, shared or previewed by you or others with whom you share. Videos are, by default, shortened to 10-second previews, but an option in settings allows videos to always show in their full formats. An Upload button at the bottom lets people share content from whatever computer they are using to Pogoplug, and a Sharing button sends files to friends via email or social-networking sites including Twitter, Facebook and MySpace. Options let people set sharing so Pogoplug constantly updates friends whenever new data is added, like new photos added to an album.

Both Macs and PCs worked for me while I tested accessing Pogoplug on the three main browsers that run on both machines: Mozilla’s Firefox, Google’s (GOOG) Chrome and Apple’s (AAPL) Safari. Internet Explorer worked on Windows. I simply opened my.pogoplug.com, entered my username and password, and I could see all the files on the Seagate hard drive. A desktop app for the Mac or PC treats Pogoplug as a local drive, making it easy to drag and drop media to it.

Most common files types can be stored, accessed and shared through the Pogoplug. I tested sharing movies, music, photos, Microsoft Word documents, PDFs and others. These digital files can reside solely on the hard drives plugged into the Pogoplug. Computers in the same network opened files faster than computers or smart phones working in other places, but the wait wasn’t unbearable.

I also used a free Pogoplug app on the iPhone and Palm (PALM) Pre, and the interface was just as simple as the my.pogoplug.com site. A Pogoplug app also exists in the Android Market app store for Android phones, but the app for BlackBerry isn’t yet in RIM’s (RIMM) App Catalog and must be installed via the Desktop Manager. Even without an app, I used the iPhone browser to open shared files sent to me in emails, and had no trouble viewing images or listening to songs.

Pogoplug is a terrifically simple way to back up files and make them accessible from afar or on the go. Starting in March, Pogoplug will be capable of synchronizing and backing up content through the cloud service with other Pogoplugs located elsewhere. For instance, you can keep Pogoplug at home and one at the office and have a backup to your backup device.

Edited by Walter S. Mossberg.

Write to Katherine Boehret at mossbergsolution@wsj.com

]]> http://allthingsd.com/20100223/pogoplug-cloud-storage/feed/ 0 http://allthingsd.com/20090722/hard-disk-error-earnings-failure-detected/ http://allthingsd.com/20090722/hard-disk-error-earnings-failure-detected/#comments Wed, 22 Jul 2009 13:55:26 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=21871 The econalypse has been particularly unkind to Seagate Technology. The hard-drive manufacturer posted a fiscal fourth-quarter loss Tuesday, its third in a row.

Weighed down by heavy restructuring charges, Seagate reported a loss of $81 million, or 16 cents a share, compared to net income in the same quarter last year of $160 million, or 32 cents per share. Analysts surveyed by Thomson Reuters had expected, on average, a loss of 10 cents per share, excluding special items.

Ugly. And it gets worse. For the year, Seagate said it lost a horrifying $3.09 billion, or $6.32 per share.

But the situation is improving–at least, Seagate hopes so. Looking ahead, the company sees revenue of $2.4 billion to $2.6 billion in the current quarter, better than it had predicted in June. “We are…seeing signs that the storage markets are improving,” Seagate CEO Steve Luczo said in a statement. Later, during a conference later, he added, “We are approaching the September quarter cautiously.”

]]> http://allthingsd.com/20090722/hard-disk-error-earnings-failure-detected/feed/ 0 http://allthingsd.com/20090602/drive-stocks-slammed-by-fears-of-new-supply-glut/ http://allthingsd.com/20090602/drive-stocks-slammed-by-fears-of-new-supply-glut/#comments Tue, 02 Jun 2009 19:07:28 +0000 Eric Savitz http://voices.allthingsd.com/?p=12288 Shares of both Seagate (STX) and Western Digital (WDC) are getting battered on fears that the hard-drive sector could once again soon find itself with a glut of supply.

At least in part, the Street is reacting to this morning’s downgrade of Marvell (MRVL) by Barclays Capital, which–as I noted earlier–was in response to indications from Taiwanese component makers of a slowdown PC demand. Barclays chip analyst Romit Shah wrote that “every company that we met with [in Taiwan] indicated that PC order rates are slowing into the back-to-school season.”

Meanwhile, Collins Stewart analyst Ashok Kumar today notes new data on drive production that he thinks raises ominous clouds for Seagate in particular. Kumar says data from Techno Systems Research, a Japan-based market research firm, find that hard-drive unit production was down 18 percent sequentially in the March quarter, comparable to a 15 percent decline in PC shipments.

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]]> http://allthingsd.com/20090602/drive-stocks-slammed-by-fears-of-new-supply-glut/feed/ 0 http://allthingsd.com/20090513/european-commission-overclocks-intel-antitrust-fine/ http://allthingsd.com/20090513/european-commission-overclocks-intel-antitrust-fine/#comments Wed, 13 May 2009 20:29:20 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=17624

]]> http://allthingsd.com/20090513/european-commission-overclocks-intel-antitrust-fine/feed/ 0 http://allthingsd.com/20090513/latest-seagate-layoffs-offer-improved-capacity-performance/ http://allthingsd.com/20090513/latest-seagate-layoffs-offer-improved-capacity-performance/#comments Wed, 13 May 2009 15:18:01 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=17591 Seagate is defragging its workforce again. The hard drive manufacturer said Wednesday that it plans to sack another 1,100 employees–2.5 percent of its workforce. With the econalypse driving down orders for personal computers and, by extension, Seagate’s storage products, the company has had little choice but to resort to measures like these as it works to return to profitability. Earlier this year, it laid off nearly 3,000 workers and suspended its quarterly dividend. But clearly, that wasn’t enough. Seagate says this latest round of layoffs will save it $125 million annually and help it become “cash-flow and earnings positive” within its 2010 fiscal year.

]]> http://allthingsd.com/20090513/latest-seagate-layoffs-offer-improved-capacity-performance/feed/ 0 http://allthingsd.com/20090403/hutchinson-issues-rev-warning-loses-seagate-biz/ http://allthingsd.com/20090403/hutchinson-issues-rev-warning-loses-seagate-biz/#comments Fri, 03 Apr 2009 15:47:14 +0000 Eric Savitz http://voices.allthingsd.com/?p=10147 Hutchinson Technology (HTCH) shares have collapsed after the company disclosed that Seagate (STX) intends to phase out the purchase of suspension assemblies from the company. Hutchinson says the change will occur over 18-24 months. In the March quarter, Hutchinson said, Seagate was about 19 percent of sales.

The disk-drive component supplier also warned that March quarter results disappointed. The company said it shipped 107 million suspension assemblies in its fiscal second quarter ended March 20, down from 155 million in the December quarter. Combined shipments for the mobile and enterprise segments were down more than 50 percent sequentially, while shipments for the 3.5-inch ATA segment increased sequentially.

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]]> http://allthingsd.com/20090403/hutchinson-issues-rev-warning-loses-seagate-biz/feed/ 0 http://allthingsd.com/20090127/econalypto-redux/ http://allthingsd.com/20090127/econalypto-redux/#comments Tue, 27 Jan 2009 13:24:19 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=11922 With IBM quietly contributing another 2,800 or so employees to the next Bureau of Labor Statistics Unemployment report, this seems like a fine time to pay respects to those who’ve gone before them. And there are many. In the past six months thousands of workers have been right-sized and offboarded. Rebalanced and rationalized. “Smartsized.”

Sacked.

A quick scan of the carnage.

• 8,000 whacked at Sprint (S)
• 6,000 let go at Royal Philips (PHG)
• 1,100 sacked at AMD (AMD)
• 4,000 adjusting to new economic realities at Motorola (MOT)
• 3,000 laid off at Seagate (STX)
• And a few hundred at Oracle (ORCL), as well
• 1,900 declared redundant at Dell (DELL)
• 5,000 losing their jobs at Microsoft (MSFT)
• 1,000 managers and 5,000 contractors pink-slipped at Alcatel-Lucent (ALU)
• 1,500 gone at Yahoo (YHOO)
• 12,000 released into the wild at AT&T (T)
• 600 cut loose at Adobe (ADBE)
• 6,000 aligned with the global economic climate at Sun (JAVA)
• And at Nortel (NT) 1,300 positions cut on top of the 1,200 previously announced

Grim isn’t it? Sad thing is, this is just a simple snapshot of what’s been happening in tech. According to the Department of Labor, employers in the states shed 524,000 workers in December, 2.6 million in all of 2008. That makes the last year the worst for layoffs since 1945, when 2.75 million jobs were lost. And that’s frightening, because according to some experts, we’ll get no respite in 2009. “We are very early in the cycle,” Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland told BusinessWeek, adding that we’ve so far only seen a sliver of the job losses to come. “We are going to see the fury of the Old Testament for what we have done to the economy.”

]]> http://allthingsd.com/20090127/econalypto-redux/feed/ 1 http://allthingsd.com/20090122/seagate-ceo-luczo-says-drive-market-still-contracting/ http://allthingsd.com/20090122/seagate-ceo-luczo-says-drive-market-still-contracting/#comments Thu, 22 Jan 2009 12:36:09 +0000 Eric Savitz http://voices.allthingsd.com/?p=7834 Seagate (STX) CEO Steve Luczo this afternoon said a sharp dropoff in demand in December as the PC market weakened was the primary reason for the company’s larger-than-expected December-quarter loss.

In an interview with Tech Trader Daily, Luczo said the company’s total addressable market appeared to be in the 150 million unit range entering the quarter, and still appeared to be that large well into November. But he says that starting in the back half of that month, demand began to crumble: He thinks the TAM dropped to about 123 million drives. (That’s down from an estimated 150 million to 152 million in the September quarter.) He says customers began reducing inventory as end-user demand sagged; that in turn triggered a more aggressive pricing environment. Luczo says that in many markets Seagate serves, this has been “the steepest and longest” pricing decline in the history of the industry.

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