“Those who study genetics… study fruit flies… If you want to understand why something happens

in business, study the disk drive industry.” − Clayton Christensen, The Innovator’s Dilemma, 1997

Min Xiao, Daisuka Itoga, Roshini Das, Surbhi Bordia3/16/2015

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What is Hard Disk Drive?

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Founded: 1979

Employees: 52,000 (2014)

Executive office: Cupertino, CA

Principal products: Hard Disk Drives (HDD)

Revenue: $13.7 billion, 28% margin (2014)

Who is Seagate?

Asia-Pacific

Americas

EMEA

OEMDistributors

Retail

Lead the world in storing, protecting and sharing its digital creations

Revenue

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High Barriers to Entry• Tens of thousands of patents• Capital intensive

High Buyer Power• Cost sensitive• Quality & reliability • Cyclic demand

High Threats from Substitutes• SSD (flash)• Optical Storage• Tape

High Supplier Power• Low profit margin• High precision• Quality & reliability• Large variety

Industry Structure• Rapid product cycle• First mover advantage• “Like-for-like”, price wars• Compete on standards

Nature of Business

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Maturity to Decline?

Good News: Seagate survivedBad News: commoditization, threats from SSD

< 60 years

> 200 companies

2+ companies

45% 40%

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Current Business – Make Everything

Cloud

ServiceGaming

DVR Storage

Client Computing (67%)

Portable External Storage

ConsumerBrand Sharing

Wireless Storage

NAS

Surveillance Camera Storage

Enterprise Storage (13%)

Client Non-Computing (20%)

It was the winning formula. But is it now?…..AHHHH

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Changing Landscape

Political / Governmental• Data-, National-Security• Anti-Trust (MOFCOM)• Environmental, labor regulations

Social / Cultural / Demographic• Mobile, media-rich, wireless• Social networking

Technological• HDD technology slowing down• SSD taking over smart-phone,

tablet, laptop, high-end enterprise• Cloud, Big Data, Internet of Things

Economic• Storage growing 35%/year• Customer shifting from PC OEM to

data centers and NAS

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OOpportunity

SStrength

• Vertical integration• Manufacturing, automation• Engineering know-how • Supplier partnership • Global, close to market

• Consumer brand recognition• Conservative, procedure-

ridden• Reactive, fast-follower• Low differentiation

• Cloud, NAS, surveillance• Out-of-the-box w/ software • Cut-out VARs, OEMs

WWeakness

TThreat

$/GB (Log)15k HDD

7200 RPM HDD

SLC SSD

• “All-flash”

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Grow Out of HDD, Provide Total SolutionStrategic Options Benefits Risks

Dominate Data Centers

• Growing market• Margin• In touch w/ end needs, optimized

system performance (software & hardware)

• Newer business

Focus on NAS, Surveillance

• Growing demand• Brand equity

• Service • Margin• WD first mover

Focus on HDD OEM• Historical• No direct sales• Focus on engineering & manufacturing

• OEMs capturing most profit• Lose touch w/ end customers

Status quo“make everything” • Diversified, hedging bets

• Resources• Manufacturing complexity• Margin

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Dominate data centers before SSD reaches cost parityImplementations – Time is Critical

Now

Realign resources

Build core competences (software & hardware)

Co-create values with customers

Branding

12-24 months

Move up stack

Deliver systems in volume

Expand service

24-36 months

Go direct to end users

Dominate data centers

“You Don’t Adjust. You Just Dominate” – Al Davis

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Supporting Documents

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Value Chain

Korat (Thailand)Wuxi (China)Suzhou (China)

Penang (Malaysia)Korat (Thailand)

Tepurak (Thailand)Korat (Thailand)

Korat (Thailand)Wuxi (China)

Woodlands (Singapore)

Normandale (US)Springtown (N. Ireland)

WAFER

SLIDER

HGA

HSA

Media

Technology Product Design

Component Manufacturing Assembly Marketing,

DistributionCustomer Service

Design CentersShakopee (US)Longmont (US)Science Park (Singapore)

System Integrators

Storage Services