day 17

what makes the world go 'round 4: wheeler dealers

The disk drive industry is dominated by five vendors: Quantum, Seagate, Connor, Western Digital, and IBM. These five own over 80% of the market, having shipped more disk drives last year than the number of Pentiums shipped by Intel. Furthermore, notice that the top two, Quantum and Seagate, are running close to one another, but nobody has achieved that magic 27% required by the New Lanchester Strategy. Nobody dominates and nobody leads. In fact, all companies are unstable. The instability in the disk drive segment has led to horrible price wars and revenue ups and downs. Each vendor has given the others a drubbing at one time or the other, only to have the favor returned. Wheeling and dealing for a marginal advantage has left everyone exhausted. The industry was in shambles until our hero arrived. What would happen if one of the top companies suddenly pulled ahead of the others? What would it take for one company to gain a 27% market share? If one company could do this, it could become the dominant drive maker, and perhaps leave the others in the dust. Quantum could buy Seagate and boost itself into 42% market share - becoming an instant dominant force. But these two companies are too strong and independent already to yield to one another. Seagate could buy up Western Digital or Connor. In fact, Connor has always had trouble keeping up, even though it is a close second to Seagate. Guess what? Hyundai just bought Maxtor. Connor and Maxtor were the two predators in the pack, often resorting to price cutting to introduce chaos into the market. Check Maxtor off your list. Seagate (Santa Cruz, California) just pulled ahead by purchasing Connor - creating in a market player through a merger. The new Seagate will command 35% of the market. This is plenty of room to propel Seagate above the 27% line dictated by the New Lanchester Strategy. Seagate is the new king pin. Seagate is what makes the computer biz go 'round. But the fun is not over, yet. There are still enough predators in the pack to keep prices dropping in excess of 10% per quarter. Disk drive manufacturers are no match for slow-moving companies like Microsoft and Intel. Disk drive makers are living in real-time. Who are these people?

what makes the world go 'round: 1 2 3 4 5 Daily Dose Index