Seagate launches enterprise drives as it retools

Seagate on Monday announced a new lineup of enterprise storage drives that aim to cut power consumption. Seagate's latest additions to its Constellation family of enterprise drives come just as units have plunged in its fiscal second quarter.

The company is rolling out two new drive models, the 2.5-inch Constellation and the 3.5-inch Constellation ES drives. The main pitch is that the new lineup will reduce power consumption in data centers.

The 2.5-inch Constellation will have capacities ranging from 160 gigabytes (GB) and 500 GB. The 3.5 Constellation ES comes in 500 GB, 1 terabyte (TB) and 2 TB. The Constellation family ships this quarter. Seagate's Barbara Craig, senior product marketing manager, said that the drives are designed to offer a smaller footprint, cut energy consumption and be more stackable in tight data centers. "The new drives basically cut power in half," said Craig.

While these new drives, which are used in everything from blade and rack servers to ATM and kiosks, won't reverse the fortunes of Seagate, they are an indication that the company is working to execute better.

The company, which has installed a new management team, reported a net loss of $496 million, or $1.02 a share, on revenue of $2.3 billion. In Seagate's second quarter, the company reported that it delivered 4.28 million units of enterprise storage, down from 5.2 million in the fiscal first quarter. In the second quarter a year ago, Seagate shipped 5.25 million enterprise storage drives.

The bulk of Seagate's disk drives are designated as desktop storage and units there have plunged too. In the fiscal second quarter, Seagate said it shipped 20.95 million desktop drives, down from 28.16 million in the first quarter. In the second quarter, Seagate shipped 29.8 million desktop storage drives.

Seagate's other storage categories--mobile and consumer electronics--also tanked. The company has said it has "significant near-term challenges" that could extend into 2010.

Seagate has also been playing catch up on the technology and product fronts. In addition, Seagate is facing tough competition from companies like Western Digital. Last week, Western Digital topped expectations for its fiscal second quarter with earnings excluding charges of $123 million, or 55 cents a share. Western Digital, which recently launched a 2 terabyte drive with 3.5 inch platters for $299, also said that it expects to earn between a penny a share and 14 cents a share in its fiscal third quarter. That projection was an improvement compared to the Wall Street estimates. In addition, companies like Symantec are pitching their technology as a way to spend less on storage.

On Seagate's conference call, executives were clear about the importance of enterprise storage to the company.

Robert Whitmore, chief operating officer of Seagate said Jan. 22 on an earnings call:

In the Enterprise market we have now completed the refresh of our 2.5 inch product line, doubling capacity to 300 gigabytes. All major OEM qualifications are now complete.

Overall, we are making progress with our new product introductions; however, simply being at par with our competitors is not our goal. Our goal is to be the clear leader in areal density and product performance, and with these recent successes, we feel we are making progress across the entire portfolio. The product advancements we have made over the last six months are allowing us to recapture qualification positions with some of our key OEMs. This is a significant step in recovering our product leadership and growing market share.

In the Enterprise market we remain the leader, and I'm encouraged with our current road map and position. This road map includes the commitment to solid state devices. We are set to deliver our first SSD product into Enterprise applications later this calendar year. SSDs and solid state technology are essential to our long-term product roadmaps, and we will maintain our investment levels to deliver leading technology as required by our current and future customers.

However, the Seagate's enterprise storage plans only go so far. The company still remains at the mercy of desktop storage and weak PC demand as well enterprise IT spending.