By Mark Hachman  |  Posted 2004-09-22 Print this article Print

-Through Approach"> Harry Blount, an analyst at New York-based Lehman Bros., recommended that the drive makers be forced to move to a more aggressive accounting method, where sales would be recorded only after they sold through the distribution channel to end customers, a practice known as "sell through." He said the current practice of "sell in" sales to channel partners leads to "stuffing" the channel with excess inventory to meet sales goals, which later can force price cuts in order to move inventory. Blount also encouraged drive makers to use EDI (electronic data interchange) techniques to manage finished inventory and components, as well as to hold midquarterly updates with Wall Street analysts to apprise them of their progress. But some argued that the quickest fix would be a merger, partnership or buyout, removing one source of competition from the playing field. Such a merger hasnt been seen for several years, as in 2001, when Quantum Corp.s hard-disk business merged with Maxtor Corp., or in 2002, when Hitachi Global Storage Technologies assumed control of IBMs hard-disk operations.
Most sources declined to comment on the record, citing either conflicts of interest or federal regulations against limited disclosure of potentially materially significant information.
The possible combinations are many, given the shifting dynamics of each submarket. For example, with five competitors now shipping drives into desktop PCs, seven should enter the red-hot mobile 2.5-inch market by 2005, Blount estimated. Between three and four vendors now serve the enterprise SCSI and Fibre Channel markets. To read about Suns and HPs focus on SAN management, click here. Two vendors—Hitachi and Seagate—will serve virtually all of the available submarkets by 2005, including the desktop, enterprise SATA, enterprise SCSI, enterprise Fibre Channel, 2.5-inch mobile and 1.8-inch "micro" categories, he said, adding that such widespread involvement would likely place both companies above any potential deals. But Blount drew scenarios that involved Western Digital, Maxtor, Fujitsu, Toshiba, microdrive specialist Cornice, Samsung and even Matsushita-Kotobuki Electronics (MKE) in various combinations. Two names in play are Maxtor and Samsung. Maxtor will likely be the last major vendor to enter the mobile hard-drive market, meaning that it could jump-start its entry with a partnership agreement, analysts said. The company has not outlined plans to enter the microdrive market, either. Samsung, on the other hand, is the smallest commodity-drive vendor, lacks vertical integration and could be ripe for the plucking. Toshiba and Samsung already have a relationship in optical disks, Blount said, and they use MKE as a manufacturing partner. Click here to read about vendors plans at the Storage Decisions conference. Toshiba, on the other hand, has been rumored to be exiting the drive market for years. "People have always questioned their commitment," one source said. On the other hand, Toshiba in January announced plans to enter the 0.8-inch disk drive market, proof of its intention to stick around, Trend/Focus Donovan said. "I just dont see it happening," he said of the rumored consolidation. TAIS executives were unavailable to comment on a deal at press time. Earlier, Scott Maccabe, vice president and general manager of Toshibas Storage Device Division, said the company would sample 2- and 4-Gbyte versions of the 0.85-inch disk drive in the fourth quarter, shipping production volumes early next year. Check out eWEEK.coms Storage Center at for the latest news, reviews and analysis on enterprise and business storage hardware and software.


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