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Tuesday, August 28, 2012
Western Digital Retakes Hard Drive Market Lead in Q2

Six months after losing the top spot in the global hard disk drive (HDD) segment due to the Thai flooding disaster, Western Digital in the second quarter recovered its market lead from chief rival Seagate Technology, according to IHS iSuppli.

Western Digital produced approximately 71.0 million HDD units in the second quarter, including production from Hitachi GST, a company acquired by Western Digital earlier in the year. Revenue for Western Digital amounted to $4.8 billion - a company record.

In comparison, Seagate shipped 65.9 million HDD units during the same period, with revenue reaching $4.5 billion - also a record in Seagate's books.

"Western Digital lost its No. 1 unit shipment ranking to Seagate in the fourth quarter of 2012 after flooding in Thailand damaged its HDD manufacturing facility," said Fang Zhang, analyst for storage systems at IHS. "The company now has fully recovered from the disaster, allowing it to sharply increase shipments of HDDs for notebook PCs, up 28 percent from the first quarter. Western Digital is on track to retain the top spot in shipments and revenue for the third quarter." Total HDD shipments for the second quarter amounted to 157.0 million units, up 8 percent from 145.1 million in the first quarter. Western Digital enjoyed the biggest shipments share at 45 percent, followed by Seagate with 42 percent and Toshiba with 13. Total HDD revenue for the second quarter hit $10.3 billion, compared to $9.6 billion in the first quarter.

Seagate, the market revenue leader for most of the time in the past decade, is forecast to sit in the runner-up spot again in the third quarter. Despite its fall to No. 2 in the second quarter, Seagate is the leader in the desktop, enterprise and non-PC segment, such as consumer electronics.

Gross margins continued to remain high for both Western Digital and Seagate, indicating flush results, despite being a small decline in the second quarter.

Western Digital's gross margin of 31 percent was 1 percent lower than in the first quarter, but still much higher than the previous record of 26.2 percent, seen some time ago in the fourth quarter of 2009.

The slight decrease in margin was likely caused by pricing pressure three weeks before the end of the second quarter.

Seagate's gross margin, in comparison, fell to 33 percent, down from 37 percent, but also still in better shape than the pre-flood level of 19.3 percent. Part of Seagate's lower margin was the result of product-specific concerns, such as noise issues in some desktop HDDs as well as contamination problems with some mission-critical enterprise HDDs. Both required a rework on Seagate?s part, adding to costs. The company says the matters have been resolved, however, and third-quarter margins should remain in the 30 percent range.

The tussle between Western Digital and Seagate - one of the historic continuing rivalries in the technology industry - is not about to ease up anytime soon. In particular, the fourth quarter will be a tossup, and the industry champion by then will depend on how well each company executes for the remainder of the year, coupled with the market performance of enterprise and consumer PC solutions on which hard disk drives depend.

The third player in the HDD storage segment, Toshiba of Japan, produced 20.1 million HDD units and posted approximately $1.1 billion in revenue in the second quarter.

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