Enjoying Market Manipulation Western Digital Posts Huge Profits Again Part 4

For decades, the HDD market was plagued by tough competition and oversupply. Asian manufacturers were successfully competing on price and performance and all players had to buy huge amounts of HDD components to ensure big discounts from their suppliers and keep the costs in check.

You really need to check out the first, second, and third part of this series before reading any further.

Buying so many HDD components meant you were manufacturing more HDDs than you could sell and you were building up stocks that would take more than 12 months to sell.

HDDs were – and still are – commodity and t he prices never fluctuated too much, so what was manufactured in one year could be sold the next year with a minor inconvenient.

To illustrate just how bad the overproduction and oversupply problem was for the HDD makers, let’s just take a look at this old statement from WD back in 1997:

“Western Digital Announces Actions to Address Industry's Sustained Oversupply and Aggressive Pricing Conditions

WDC Western Digital Corporation today announced a series of actions designed to lessen its exposure to sustained oversupply and higher-than-normal competitive pricing pressures in the hard drive industry's distribution channel and to sharpen the Company's focus and resources on its desktop and enterprise storage bus inesses. The Company will:

* further reduce production of desktop hard drives from previously announced levels;
* further accelerate its transition to desktop and enterprise hard drives
…

Chuck Haggerty, chairman, president and CEO of Western Digital, stated:

The conditions leading to our current financial performance have been painful in the near term. We are taking the lead in further reducing production volumes in response to oversupply in the distribution channel and extremely aggressive pricing, principally by Japanese and Korean competitors. "

Eleven years later, in 2008, the situation was not too different, as WD was not done complaining about the “bad” competition in the market, the oversupply and low prices, as we see here:

“Our prices and margins are subject to declines due to unpredictable end-user demand and oversu pply of hard drives.

The hard drive market has experienced periods of excess capacity which can lead to liquidation of excess inventories and intense price competition. If intense price competition occurs, we may be forced to lower prices sooner and more than expected, which could result in lower revenue and gross margins.”

Even this year, in 2012 industry analysts fear that the market will start to see beyond the smoke and mirrors of the fake HDD crisis and state that,

“Though some fears of oversupply remain, we believe that Western Digital’s growth prospects remain intact. The company’s decision to buy back additional shares worth $1.5 billion and launch new drives will act as catalysts.”

The experts know that there is still oversupply in the market and the prices should be going down, not up or stay flat.

The only thing left for you users to do is to just avoid buying HDDs until the prices get back to the summer of 2011 levels, or even 10% higher.

This is very difficult to do, but if you invest a bit more in a cheap 128GB SSD, you’re much better off than buying an overpriced 500GB HDD.

Sure, you’ll need to get back at saving your data on discs like back in the times when CD-RW uni ts were indispensable, but at least you wouldn’t be filling WD and Seagate’s pockets.

All this is quite difficult to do for the average PC user, and it is arguably not the way to react to something like this.

The correct reaction is for you to make an inquiry to your local and central authorities about handling this issue officially.

After all, seeing a company's net income rise 1200% in a year marked by catastrophic floods and a global economic downturn should attract some attention, like we reported here.