Irvine-based Western Digital Corp.’s chief executive-in-waiting, Steve Milligan, faces a challenging landscape when he takes the helm of the world’s top disk drive maker early next year.
Consumer and business habits are changing. The growth of mobile devices present new opportunities and potential pitfalls. And the rapid adoption of personal and corporate cloud services is pushing storage demand to new heights.
Milligan’s strategy to meet those challenges will be tested when he takes the top post in January—and likely judged against the performance of Western Digital’s longstanding rival, Cupertino-based Seagate Technology LLC.
“We are arguably at an inflection point, not only for ourselves, but within the broader landscape of what we are, the environment that we exist in,” he told analysts during a recent investor day at the company’s headquarters. “Change to us represents opportunity.”
The event provided company watchers with initial insights into Milligan’s outlook just a week after he was tapped to succeed Chief Executive John Coyne.
Coyne, 63, is set to retire after nearly three decades with the company. He has served as chief executive since January 2007.
Milligan rejoined Western Digital earlier this year following its $4.3 billion buy of Hitachi Global Storage Technologies Ltd. He had served as Western Digital’s finance chief from 2004 to 2007, then took the same position at Hitachi Global, where he later became chief executive.
Milligan highlighted three areas of focus for Western Digital during his address to analysts: the mobility segment and the shift to lighter and thinner devices; the corporate cloud network and data centers; and consumer cloud services.
“These are key areas where we see opportunities, where customers, whoever they may happen to be, are facing different challenges and where we have the opportunity to innovate and bring technology into the marketplace,” he said.
New Drive
Western Digital used its analyst day to debut the latest disk drive it has in the works, which promises to store more data and boost system performance. The 5-millimeter drive will enable the thinnest computers on the market to provide 500 Gigabits of storage. It’s about half the size and weight of the current 9.5-millimeter hard drives, and costs 90% less than standard solid-state drives.
Hard-disk drives use spinning disks to store and allow access to data. Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics such as DVR players.
Solid-state drives use chips to store data with no moving parts.
They’re viewed as better handling high-volume data transmissions, and sold largely to corporate customers.
The corporate segment of the drive market typically brings higher margins, and has historically trailed sales in the consumer market for Western Digital.
Helium
The new drive could address that with a hybrid approach that mixes hard-drive and solid-state technology that came in the Hitachi Global buy. It uses helium instead of air to spin disks stacked inside the drive that store data. That lessens power consumption, improves data capacity and speed by reducing the distance between the data stacks, and lowers noise levels, according to the company.
The hybrid could present an attractive alternative for corporate networks.
Western Digital has partnered with Taiwan-based Acer Inc. in an effort to improve laptop performance with the new drives, and is now sampling the product, with an expected launch early next year.
It’s billed as an evolutionary step for the company as it strives to stay ahead of Seagate in innovation and market share.
Seagate
Seagate isn’t sitting still. In March it introduced a solid-state drive in development that’s pegged to double the storage capacity of the current standard, according to the company.
The Hitachi Global buy had positioned Western Digital to become the leader in both hard drive unit sales and revenue as it opened up new inroads in the server and data-center market. But record floods in Thailand late last year crippled key operations there, where some 60% of its drives are made.
Lost production caused the company to lose its title as the top seller of disk drive units in the December quarter to Seagate.
A faster-than-expected recovery from disruptions in Thailand, and added sales from the Hitachi Global integration, helped Western Digital recapture the crown in unit shipments and narrowly surpass Seagate in total sales on its way to posting record earnings in the June quarter, the end of its fiscal year.
Western Digital shipped 71 million hard disk drives in the June quarter, besting Seagate’s 66 million units.
Quarterly sales totaled $4.75 billion, topping Seagate’s $4.48 billion in sales and marking the first time in at least a decade Western Digital held that lead, according to a company spokesperson.
Both companies are readying for a slump based on recent forecasts of a significant dip in global demand for disk drives this quarter (see Technology column, page 53).
New Frontier
The hybrid disk drive marks a new frontier for Western Digital, but it doesn’t necessarily mean a sea-change away from hard disk drives, according to Milligan.
“We estimate that by 2020, that 85% of all of the data that is created that needs to be managed will continue to be stored” on hard drives, Milligan said.
“We have the opportunity to move the market—and move the market in a direction that we think makes the most sense from a customer perspective, from a financial perspective,” he said.
