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Storage

Seagate's mission--'digitizing your lifestyle'

For CEO William Watkins, the next decade is all about moving content from home to car to handheld.

The iPods and TiVos of the world get all the glory, but it's the largely unheralded hard drives on the inside of today's popular gadgetry that do a lot of the heavy lifting.

But you won't hear much complaining from hard-drive maker Seagate Technology, which sees boom times ahead in the blossoming of storage for consumer-oriented devices and the advent of the terabyte era.

This month, meanwhile, marks a milestone for Seagate, which will close its earlier-announced $1.9 billion acquisition of Maxtor.

CEO William Watkins sat down recently for an interview with CNET News.com to talk about the future of the combined company and changes in storage technology.

Your shares got capped after your last quarter, even though you beat estimates for that period. I suppose it was the cautious guidance that turned investors off. How do you see the next quarter or two shaping up in terms of broad demand?
William Watkins: Well, when I think about what's going on, there is a tremendous opportunity in storage now. The investment community is trying to get their hands around what all this consumer storage will mean. We have a couple of issues. One is convincing the investment community that there's tremendous revenue growth going on in storage; storage is a real growth industry...If you believe in the story of storage growth, then Seagate is in the best position to take advantage of that growth. And then we've got to convince the investment community that the management of this type of company doesn't have shit for brains. I mean they all think, come August, we're going to go into price wars.

The next 10 years is all about digitizing your lifestyle. It's about you having the ability to move content electronically from your home to your handheld to your car and back and forth.

As the CEO of a publicly held tech company, how do you balance investing and making decisions for the long term, which is good for the company, against knowing that the folks on the Street will cream anybody if they're off in the next quarter by so little as a penny?
Watkins: Yeah. You know, I kind of think that's crap, to be honest. And I'll tell you why. You can get hurt in the short term, but I just think that's a weakness of people not standing up and articulating what they believe in. When we lay out our plans, we know what we're going to invest in technology, so I'm not going to change it due to a (financial) quarter. And if I miss a quarter, I miss a quarter. We believe in our technology, we believe in our business model, and we know we have to invest.

Applications beyond the PC market now account for about 30 percent of your revenue. Do you think that's going to be a growing part of your business?
Watkins: That's where you're going to see lot of the growth. A few years ago everything that we shipped was attached to some sort of PC. Now we're shipping all these DVRs, cable set-top boxes, handheld devices, retail backup drives for retail--and so we have all these other applications. Storage, if you think about it, the first 25 years has been about digitizing your business, optimizing how you work, and using computers to make yourself more efficient. The next 10 years is all about digitizing your lifestyle. It's about you having the ability to move content electronically from your home to your handheld to your car and back and forth...So you're going to replace tapes and DVDs and CDs and things like that with electronic distribution.

The Maxtor acquisition closes in May. Do you see a successful integration as probably being the toughest management challenge you're going to face as CEO?
Watkins: No.

Really?
Watkins: I've done integrations before. This one is a little different, but I think the tougher challenge that we have to face is developing technology constantly. Just to give an example, it took the industry 50 years to get to 500GB per drive. We've just jumped to 750GB drives in six months. This is to tell you how the technology is accelerating.

OK, let's talk some tech. You're now getting close to the terabyte range for hard drives. I think the latest 3.5-inch model holds up to like 750GB.
Watkins: We've just announced our 750; we're starting to ship it right now. How much longer will you be able to keep the technology edge over the competition, with the perpendicular hard-drive business obviously changing pretty quickly?
Watkins: We wake up every day very paranoid. We think we have a nice lead now--six months maybe. There's nothing that says people can't do what we're doing if they're willing to put the investment, the time, the energy in there. What's important is how we've done it; even if they catch us, we think that we can bring that technology to market a lot more cost effectively than anybody else.

Is there a hard-drive analogy to Moore's Law? Are there limitations that are going to change the way you think about hard-drive technology limits?
Watkins: We have a technology road map out about seven years right now. We see issues, but I think we see a lot of ways to get around it.

What are some of the issues?
Watkins: Well, you think why we had to go perpendicular (technology). If you think about it, within a disk on the media it's just a bunch of little magnetic particles, north and south poles...As you pack more capacity on a disk you've got to put more particles. And if you put more particles on there, the particles get closer and when they get too close, they want to repel, just like, you know, two magnets want to repel. That's a natural physical magnetism, and so when you're longitudinal, when you get so close they start repelling, you can't hold them...So, the next technique will be how do we get them very close together so that they don't repel each other.

What time frame are you talking about here?
Watkins: We're committed at Seagate to increase the areal density per disk 40 percent a year. I'm sure there's going to be a limit and we have to figure it out, but we'll try a little more in opticals and stuff like that.

The hard-drive business is turning 50. As you look back, what's the biggest surprise you've seen in the way hard-drive technology has developed over the course of these last decades?
Watkins: Reliability. I mean, it's amazed me, as we have packed a lot more sophistication and a lot more technology and a lot more capacity in these things, how much the reliability and quality has improved over this time.