Seagate relegates Maxtor brand to the bargain bin

Two-product-line plan -- one for the high-end, one for the cost-conscious -- shares R&D and automated manufacturing

Just about nine months after announcing its acquisition of Maxtor, Seagate is finally telling the world how the two combined companies plan to dominate the disk drive market.

Before getting into the details, though, it helps to understand where the few vendors that feed that market stand, according to IDC statistics for 2005.

Put together the total number of units shipped by Seagate and Maxtor, and the result is a whopping 160 million disk drives, more than 42 percent of total shipments worldwide. Western Digital is a clear second, with little more than 17 percent of total shipments, followed by Hitachi with a bit more than 15 percent. Following Maxtor (fourth place with almost 14 percent), are Samsung, Toshiba, and Fujitsu with single-digit percentages.

How will the other players challenge Seagate’s formidable lineup of products and market share? Price warring comes to mind: put the heat on market leader Seagate by lowering prices below profitability and compensating losses in the disk drive sector with profits from other business lines.

Doable? Perhaps, but that strategy -- good for, say, the consumer space -- probably won’t work in the enterprise segment where price is often less important than other factors such as sheer performance, unfailing reliability, or custom engineering.

Keeping that in mind, it’s reasonable to anticipate that the new Seagate will have to fight several wars on various fronts and develop appropriate and different strategies to maintain its leadership.

Marc Jourlait, vice president for segment marketing at Seagate, says that the large, diversified presence of the Maxtor brand will give Seagate the ability to fight competitors with a closer match of products.

“Seagate has always been positioned as a premium brand, and sometimes we had to downgrade our offering to meet competitors’,” Jourlait explains. “But now we have a new weapon in our arsenal [the Maxtor brand] which will allow us to fight the battle on our terms.”

It’s probably an over-simplification, but what emerges from my conversation with Jourlait is essentially a split over two lines of products: one under the Seagate brand addressing customers with premium requirements, and the other under the Maxtor brand oriented to more cost-conscious customers.

Jourlait explains that the two lines of product will benefit from joint R&D (although at different times), and will be manufactured at the same highly automated plants. He also gave me some good examples of how the two brands will diversify, pointing out that drives with high-end enterprise connectivity -- that’s FC, SCSI, and SAS -- will be part of the Seagate portfolio only.

In addition, that Seagate portfolio will include all serial and parallel ATA drives as large as 750GB capacity, whereas Maxtor’s portfolio will be confined to lower-capacity devices as large as 300GB.

Will Seagate’s diversified product strategy work? I don’t see why not, but the disk drive market is top-heavy at the moment. I wouldn’t be surprised if another acquisition comes along, intended to fill part of the gap between Seagate and its closest rivals. Anyone willing to venture a guess as to who will buy whom?

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