Seagate Fills In the Gaps with Maxtor PurchaseBy John Hazard | Posted 2005-12-21 Email Print
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With the acquisition of one of its hard disk rivals, Seagate will add a presence in some new markets and channels.
With the acquisition this week of hard drive rival Maxtor Corp., Seagate Technology, LLC, fills in some gaps in its market and channel reach, said Seagate sources and channel partners of both companies.
The Scotts Valley, Calif., vendor has made no decisions about the future of the two companies' product lines or channel programs, but Seagate executives expect the acquisition of one of its direct competitors to deliver a stronger presence in markets and channels where it played behind Maxtor, said Brian Dexheimer, Seagate's Executive Vice President of Global Sales and Marketing.
"What it allows us to do, is improve our market presence," said Dexheimer. "Seagate already offers the broadest set of products in the market. This extends that lead. It allows us to offer a broader set of products to a greater number of channel partners.
"In some parts of the world they covered what we didn't, and we covered what they didn't. Now we cover more and with more partners."
Seagate and Maxtor partners said Seagate would benefit from increased market share in Latin America, where Maxtor performed well relative to Seagate and also at the smaller end of the market, where Maxtor has become a brand name.
"Seagate was primarily for the higher performance, higher quality, higher end of the market," said Fred Schlaffer, president of B3 Computers, a system builder in Gwinn, Mich. that builds about 20,000 custom desktops, notebooks and servers for small VARs.
"Maxtor was more for the standard, everyday drive. That's where they had the presence and that's where we see Seagate's play here."
One marketing move Seagate would be unwise to make, Schlaffer said, is to alter Maxtor's brand positioning.
"[Maxtor One Touch] is one of the few devices customers actually ask for," he said. "People know the Maxtor name in a way they don't know the Seagate name. You don't want to mess with that."
Seagate also expects the merger to slice $300 million in operating expense from both company's balance sheets and remove a competitor to improve its position in the aggressive storage market.
Dexheimer and Seagate executives said they look forward to passing along savings to customers, but the improved market share and position is unlikely to affect pricing.
"More than anything it makes them profitable and makes the market more stable," said Brian Peterson, vice president of ASI, an IT distributor with a large storage practice.
"Now the competitors are fewer. No small guys on the block. The bigger the players are, the more likely they are to become giants and the harder it is for them to squeeze each other out.
"Eventually, they get so big, they don't want to squeeze each other out. They're not losing money at that point. They're likely not to drive price down," said Peterson.