Everyone Needs a Dream!

Implications: * Hitachi president Kazuo Furukawa said that Hitachi wants to surpass Seagate’s HDD business profitability  * Furukawa-san said that Hitachi has the latest technology required to be competive in the HDD business  * He also said that there is synergy between Hitachi’s computer business and its HDD business  * In the last two quarter Hitachi has reported profitability, although no where near the levels of Seagate and Western Digital

Analysis: Hitachi’s hard disk business, Hitachi Global Storage Technology (HGST) lost money from 2005 until the last calendar quarter of 2007.  It is only in the last two quarters that the company has returned to profitability.  This profitability was achieved by laying off workers, consolidating manufacturing sites and pairing down some smaller and less profitable HDD programs, such as their 1.8-inch disk drive programs. 

The president of Hitachi says that his goal is to surpass Seagate’s profitability but there are many challenges that HGST will have to surmount to achieve this goal.   Hitachi has had a history of management and cultural conflict, left over and never properly resolved after the merger of Hitachi and IBM’s HDD division to create HGST. 

This has resulted in many program misfires, in particular HGST lost most of its market share in the enterprise HDD space to Seagate and Fujitsu as a result of problems getting generations of enterprise HDDs to market.  Back in the 1990’s IBM was the market leader in high performance HDDs.  These management issues will need to be addressed and resolved if HGST hopes to have a chance to permanently improving their time to market and thus increase their profitability.  

HGST also has probably the highest cost to manufacture HDDs of any company now in the industry.  This is a result of their history of multiple sites in many countries making the components for the drives and then shipping these parts all over the world for assembly.  The company has made good strides towards consolidating its production facilities and this is starting to help the bottom line but this work is not yet finished. 
HGST needs to get its costs under control to improve their profitability.  

The obstacles to improved, much less leading profitability for HGST are daunting but Hitachi has taken steps to deal with these issues.  It will take continued determination to continue profitable quarters, much less achieve industry leading profitability. 

Everyone needs a dream and dreams can lead to fulfillment, especially if diligently carried out by a company with deep pockets.  We will have to keep our eye on Hitachi to see if they can turn their dream into reality.