The storage industry is reeling after a disastrous last quarter, its worst crisis since 1993.
Seagate and Quantum, two of the biggest players, issued profit warnings for their last quarter, blaming the slump on over supply and tough price pressure from new competitors.
The last year has seen many PC makers enter the storage market and vie for their piece of the action with very aggressive pricing.
Also, all the main vendors have armed themselves for the usual fourth quarter under supply, causing huge overcapacity in the market.
Analysts do not believe any of the main players will disappear, though there may be a shake-out among smaller ones and further rationalisation in the large companies.
Seagate has already closed down its Irish plant and could not confirm that it has no plans for more cutbacks.
A spokesman admitted: "We have 110,000 employees worldwide and some hard decisions to make, but we will do what is best for our customers and shareholders."
The company hopes its vertical integration puts it in a better position than most. It blamed the profit slump on "a demand weakness causing over supply and new aggressive competition".
Arch rival Quantum was more cautiously optimistic. Donald Stewart of Quantum said: "It was our best ever quarter in Europe so we are optimistic but it is a tough time, especially as December is usually our best period. Because there are usually shortages in December everybody geared up their production at the same time."
He added: "Because of the Asia crisis our drives had to go to other parts of the world, which put added pressure on prices."
But Stewart insisted Quantum would not be making any dramatic changes within the company because of the current market trouble.
Bob Peyton, an IDC analyst claimed: "The disk drive companies have faced some very aggressive challenges from new players, like Samsung and Fujitsu, but Seagate, Quantum and Western Digital are all strong enough to see this through."
He added however: "IBM gained most at Seagate?s expense. Seagate?s vertical integration could work against them because they could suffer doubly."
But James Porter, president of US based industry watchers Disk/Trend, insisted: "Profits should be back to normal by the second or third quarter of this year. Despite the current profit wane shipments are not going down. The mobile, desktop and silverdisk markets are all on the increase."
Porter also believes that Seagate?s recent change of three key personnel should help steer it through the tough times. He explained: "Seagate has a new president, chief technical officer and head of drive manufacturing."
"The current difficulty is characteristic of the storage market and caused mainly by new competition which has sprung up in the last year," he added.
Porter argued: "The question is how long companies these Korean-based companies can keep up this aggressive pricing in the midst of the Asian economic crisis. The terms of the IMF loan to Korea state that all businesses must make profits so although Samsung, Hyundai(which owns Maxtor) and Fujitsu are cushioned by their other activities, will their government let them run loss making divisions?"
However a Maxtor spokesman retorted that the company is "pleased with its end of year results, which show a profit for the first time".
He also denied that Maxtor had depended on cut price selling. He argued: "We have a time and quality advantage. We don?t set retail prices and have no control over retailers selling one of our most popular products as a loss leader."
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