Seagate Case Study

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Silver Lake began to investigate the possibility of acquiring Seagate’s disk drive operations. Due to Seagate’s size, market capitalization and industry-leading position, the proposed buyout had the potential to become a landmark transaction. As part of a two-step deal, VERITAS will acquire Seagate, then sell Seagate 's operating assets for $1.9 billion to Seagate executives and a buyout firm (Silver Lake). For Seagate to "unlock" their value without incurring tax penalties, they will sell their 33% stake in VERITAS (128 million shares) back to VERITAS, who will then sell back fewer shares, instantly increasing earnings per share. Historically, the financial performance of Seagate and the rest of the disk drive industry had been extremely …show more content…

Another source of its competitive advantage is the segmentation strategy the company follows, by serving both highly standardized products and high end differentiated product Seagate managed to maintain adequate sales while foreseeing a steep decline in the disk drive industry product cycle. However, by being its own supplier, Seagate has above average CAPEX and variable costs, 2 indicators we shall pay close attention to as they essentially pertain to our buyout …show more content…

We utilize higher growth rates for years 2000-2001 at 24% which will decline all the way down to 5% in 2006. However, these projections cannot be warranted because the technology sector and sub industries are considerably dynamic, highly competitive and characterized by short product life cycles. This could also add up to the motives behind the high volatility nature of the industry profits. A last aspect discouraging us for fully supporting such growth assumption is the high research and development investments imposed upon the industry, Seagate’s vertical integration will entail more process innovation coupled with the already known sustainable product innovation makes up the final driver that to our best sense, would depress this overly enthusiastic growth rate expected by

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