Seagate CEO sees disk drive price war continuing

Reuters - Seagate Technology, the world's biggest computer disk drive maker, expects aggressive moves by rivals to depress industry prices for another year, longer than most analysts predict, its CEO said on Wednesday.

Chief Executive Bill Watkins said Seagate was prepared to meet hard disk drive price cuts by competitors, including Hitachi Ltd. and Samsung Corp., that are hungry for market share.

"If pricing doesn't drop for us, it'll be an upside," Watkins said in an interview.

Watkins also said the Scotts Valley, Calif.-based company has begun an internal audit of its options-granting practices and has so far found no problems.

Seagate has not been contacted by regulators or prosecutors, he added. The U.S. Securities and Exchange Commission has more than 80 investigations underway into potential stock-option manipulations that generated large paper gains for executives.

"We have a very rigorous stock-option grant program," Watkins said. "It's such a rigorous process. We feel very confident."

Seagate said yesterday after the close of regular U.S. trading that its fiscal fourth-quarter net income plunged 98% on costs from acquiring rival Maxtor Corp. in May (see: Seagate to buy Maxtor for $1.9B ).

The stock fell 3.3% on Wednesday in New York Stock Exchange composite trading and was the worst performer on the Merrill Lynch Technology 100 Index, which was up 0.4%.

Watkins said the current hard disk drive industry price war would continue at least through the middle of next year.

That runs counter to the view of Wall Street analysts including Laura Conigliaro of Goldman Sachs, who wrote in a research note today that prices would likely begin to stabilize toward the end of this year as holiday sales stoke demand.

"Seagate is not assuming any real improvement through the middle of next year, which seems unrealistic," wrote Conigliaro. "Seagate is sounding somewhat gun-shy."

Watkins said the toughest competition was in the low-end personal computer segment, with hard drives containing 80GB or less of storage capacity.

Hitachi and Samsung appear to be aiming for greater market share, cutting hard disk drive prices at the expense of profitability, Watkins said. He added that gaining market share in low-end components was not worth the lost profits.

"They are getting volume units and share, but it's lousy share," Watkins said.