Western Digital Hopes to Get Disk Drives to Market Soon : Computers: The financially ailing company looks to the 2.5-inch series to help in its recovery plan. Product is called critical to firm’s future.
Western Digital Corp., a manufacturer of personal computer components, said it will soon begin shipping a series of disk drives that analysts say is critical to the company’s future.
The financially struggling company said Tuesday that it will ship its Tidbit 2.5-inch hard-disk drives for 5-pound to 8-pound notebook computers this quarter and manufacture the products in volume in the fourth quarter.
“It’s not a moment too soon, because the pricing in the low-end disk-drive market is dreadful,” said Richard L. Whittington, an analyst at Kidder, Peabody & Co. in New York. “It’s absolutely critical for Western Digital to begin shipping these high-end drives so they can start producing profits.”
Next to the microprocessor, or main processing chip, the hard-disk drive is the most sophisticated part of a personal computer. While Intel Corp. dominates microprocessor manufacturing, a variety of companies make disk drives.
Like the rest of the PC market, the $9.5-billion disk-drive industry is experiencing withering competition in the lower end of the market because of price cuts led by leading producer Seagate Technology in Scotts Valley.
Western Digital has suffered from that price war, as well as from delays in shipping some of its disk-drive products, since disk drives account for about half of its nearly $1-billion annual revenue. The company also makes various other PC components, such as chips that control video screens.
In August, the company reported a loss of $134.2 million for its fiscal year ended June 30, and it confirmed last week that it would discontinue making a line of 3.5-inch, low-capacity Centaur disk drives.
To make a profit, industry players such as Conner Peripherals Inc. in San Jose and Western Digital are focusing on high-performance drives, such as the fast-growing segment for notebook computers, where there are fewer competitors and profit margins are higher.
“We are shifting to focus on higher-performance drives including the notebook market,” said Robert J. Blair, a Western Digital spokesman.
Conner dominated the notebook-drive market in the past year with its 2.5-inch, 60-megabyte drives. But it faces new competition as the industry moves on to 85-megabyte disk drives, which store 40% more data.
The 85-megabyte drives are expected to be popular because the capacity level is roughly equivalent to the memory storage of a typical desktop computer loaded with spreadsheet, database, word processing and graphics-applications software.
Western Digital’s announcement means that it will compete with Conner in that high-capacity segment. Western Digital’s new 2.5-inch drives will be available in 42.5-megabyte and 85.2-megabyte memory capacities. The company will make them at its manufacturing plant in Singapore.
“The 2.5-inch series are extremely important products to Western Digital’s recovery plan,” Blair said. “That’s why we feel good about being early to announce the products. In the disk-drive business these days, time-to-market equals profit.”
The fall production schedule puts Western Digital in a good position to compete with Conner, said Crawford del Prete, an analyst for market researcher International Data Corp. in Framingham, Mass.
But he said Western Digital must show that it can meet the announced production schedule and that it can weather more price discounting as other competitors launch their own 85-megabyte drives.
Conner Peripherals began shipping 85-megabyte drives for the notebook market in large quantities this quarter. Seagate, Quantum Corp. in Milpitas and International Business Machines Corp. are expected to start shipping similar products soon, according to Michael Murphy, editor of the California Technology Stock Letter in Half Moon Bay.
“It’s an important product for Western Digital,” Murphy said. “I don’t think the company lives or dies by it, but it’s important if they want to remain a player in the disk-drive business.”
Sales of Disk Drives to Computer Manufacturers 1991 market share (estimates). Total market is $9.5 billion Other: 12% Hitachi: 3% Fujitsu: 4% NEC: 5% Western Digital: 6% Micropolis: 6% Quantum: 8% Seagate: 28% Conner Peripherals: 18% Maxtor: 10% Note: Figures include 2.5, 3.5 and 5.25-inch disk drives. Source: California Technology Stock Letter
