Seagate CEO Bill Watkins is not shy of speaking his mind. In one interview he infamously admitted: “Let’s face it, we’re not changing the world. We’re building a product that helps people buy more crap – and watch porn.” In a recent London meeting with the press, one of the most important days in US political history, the boss of the world’s largest hard drive maker was equally forthcoming, introducing himself by saying: “Yes, I did vote for Obama.”
This admission indicates Watkins’ ability to spot a sure bet, but while he led a $12.7bn (£8.6bn) revenue company that is a big fish in the storage pond, at that moment there was little than he could say about the current financial market. “I have no visibility,” he says. “The macro-economic conditions have everybody stalled; firms are like deer in the headlights. Our theme is ‘onward through the fog’.”
Watkins says that the IT industry generally is going through a flat period, but adds that this is nothing new. “What gives us hope is that the world has changed. We went through a time like this back in 2000. Everyone bought a ton of storage to get over the Year 2000 phenomenon, but after that there was a real stall for IT spending that lasted for two to three years.”
While the slowdown in the early part of this decade was mostly concerned with the business-to-business market, now there are new customers for Seagate’s goods, and indeed for all IT firms as consumer and business spending habits blur. “Back then, everybody in the IT world was about selling to the enterprise,” says Watkins.
“Whether it was EMC selling storage, Dell selling PCs to small businesses, Microsoft selling the operating systems or Cisco selling the networks. All apart from Apple: Apple in the Nineties wasn’t very good at selling to business, and no one bought Macs in the business world.”
Now though, these firms have a new market, a market that continues to grow. “Flash forward to today and what we were doing in the enterprise market we are now doing in your home. We are flooding your home with content. It it’s not data in the conventional sense, but it is rich media content, its high-definition television, and video... most of it self-created, and it all requires a lot of storage.
“In the IT world, it’s a battle for your home. EMC buys Iomega to get a footprint in the home, Sony and Microsoft put games consoles with huge hard drives in there, and Apple becomes a real winner. All of the players want to put their hardware in your home and sell you a service on top of it. We sell more storage into the home than we do to businesses – and we own 60-something per cent of that.”
Watkins says that about a third of all disk storage in the world is held on Seagate drives, adding, “The underlying phenomenon of digitising your life is very real... and we are very excited about the opportunities for storage.”
Watkins dismisses suggestions that items like Apple’s iPod are a threat to his firm and its business. “In order to get content in your hand, you need enterprise storage in the cloud,” he says. “[Apple’s] iTunes has got to have a big storage system, then they have to download it to a notebook or a PC into your hand. That whole ecosystem requires four or five different types of storage. Storage has to grow to compensate.”
This small-device storage market, which includes other popular consumer devices like mobile phones does not appeal to Watkins. “There isn’t any money in it. I don’t need to get into a market I can’t make money in. Whether it is Micron or Samsung or SanDisk, they are selling at a loss. I could do one now; doing a product is not a big deal, but making money out of it is important,” he says.
What about online storage, and services in the cloud? “Everywhere storage is deployed, it drives the need for storage. As soon as I can make money I will jump all over it. We don’t think you will store much on the web. The cost of bandwidth is pretty expensive. To download movies like that when you want to watch them... there would have to be quantum leaps in bandwidth. People will keep it local, two or three terabytes of storage all in one place is the most economical way of storing and serving your media.”
An extremely competitive man, Watkins occasionally scorns the competition, and frowns on some elements of entrepreneurialism. “We don’t like grey markets,” he says. “It screws up whole pricing. We had a guy – when DRAMs were going up, he was buying drives on credit, selling them for cheaper than he bought them, and using the cash to buy DRAMs. He was then able to sell the DRAMs as the market was exploding. By the time the month was up and he came to pay us back we were able to track his serial numbers around the world. We don’t like grey markets.”
As evidenced by his statement on pornography, Watkins remained aware of just why people are buying Seagate devices, and it isn’t for reasons of security. “People are walking into stores and buying drives because they are running out of space – they just need more storage. You don’t clean out your closet and you don’t clean out your drive. We want to change this and teach people how to back up.”
If Watkins is right, even though customers will continue to hoard old wedding photos, videos and other media, disk capacity will be able to keep up with them. “I think it will grow by at least 50 per cent a year, maybe more in certain applications,” he predicts.
“We are in a bit of a catch-up situation. This time last year we shipped a 160GB two-disk notebook, today its a 500GB two-disk notebook,” he said. “We see ourselves doing a terabyte per square inch within four years.”
Meanwhile, despite the rapid rise in solid-state media, non-platter methods of storage simply will not be able to keep up. “There is no alternative to disks,” Watkins argues. “Disk drives are replacing tape, and while solid state will have some applications, by 2012 it will still only be [in limited capacities]. You can get 100 per cent backup with disks; you can’t get that with solid state.”
Although personal storage has had a negative impact on security with a series of data breaches caused by mislaid memory sticks, Watkins argues that if users were to learn to use their storage media correctly, these could be a thing of the past. “We put encryption in the drive and you put your password in it – now it’s solid,” he says.
“To eliminate your data is a multi-day process – the only ones that do that are the government. If you don’t do that, people can take your data off it. Trust me, we’ve taken data off disks with bullet holes in them, we’ve taken acid-spilled disks.
“We get a lot of drives from the CIA and the FBI and we take the data off them but if you encrypt it, it’s safe. They can’t break that encryption. Some governments don’t like it. The Chinese won’t buy them; the Russians won’t let us in there. But if you encrypt it, it’s safe. The only way to get into it is with some sort of backdoor that we could put on it.”
As for alternative suppliers, Watkins simply asks, “Do you want all the British security data on a drive that’s designed by the Chinese?” Closer to home, Watkins is more relaxed about the competition, and seemingly unworried by rivals’ habits of dropping prices to increase market share.
“We all have our fingers in that dead body and we all point fingers about causing price wars,” he says.
“I am sure we are guilty as some people, but we look at ourselves and make sure we are not doing bad things,” Watkins adds. Besides, he says, stirring the pot, who knows how long they will be around? “You hear a lot of rumours about Fujitsu and Samsung now...”