Newsmaker: The face of a kinder, gentler Seagate

Bill Watkins, CEO of Seagate Technology, vividly remembers his first staff meeting at the hard-drive maker back in the '90s.

For several hours, the company's top executives screamed and swore at each other before giving out an award: the stuffed head of a dog. Nothing got accomplished.

A lot has changed since then. The largest drive maker in the world, Seagate is consistently reporting profits and branching out into consumer electronics, cars and home storage systems. Part of the turnaround can be attributed to a tighter focus on customer needs, and another part can be attributed to a teamwork culture instilled by Watkins and his immediate predecessor Steve Luczo.

Watkins spoke recently with CNET News.com about the drive industry, price cuts and the problems facing corporate America.

Q: Seagate and some of the other companies in the drive industry are making money right now, but it's always been a difficult place to be. Why is that?
Watkins: The industry has always had sort of cloud of over it--the "best house in a bad neighborhood" thing--and I think part of that was what happened during the '90s. Storage was growing, but we were increasing capacity quickly, and there were 30 disk drive guys. Revenue was flat, just flat. Think about living in a world where your revenues are flat, but you're increasing the number of units you're shipping. Total revenue for the industry at one time was $24 billion, $25 billion. By 2000, it dropped down to $20 billion.

The industry has always had sort of cloud of over it--the "best house in a bad neighborhood" thing.

Then two things happened. First thing: Our ability to increase increase areal density slowed. For a long time, we'd come out with new products that would double the capacity every year. One year, you have a 10GB single disk, and next year, it would be a 20GB disk at the same price. Well, the technology to do that got harder and harder, and so we started increasing areal density at 40 percent a clip. So the pure storage needs began to outstrip our ability to design higher-capacity drives.

Then the other thing was a big kick in consumer, which started around 2001. It started with things like DVRs (digital video recorders). Then you had the Apple iPod, which was a storage device. You had Xbox. All of a sudden, industry revenues are up to $30 billion.

How big is consumer right now for you guys?
Watkins: From a unit standpoint, we did 6.5 million drives in the last quarter, which is up pretty dramatically from the year-ago quarter.

A little while ago, you bought Mirra to get into home servers. How is that going?
Watkins: We bought Mirra more for the technical ability of the people. It was a very small acquisition. We're shipping our products, but really we wanted that expertise for the future generation of products. We think there is going to be home business. You're going to back up your data. You will want to be able to access files remotely, and we think that not only the hardware, but some value-added software in that space is going to be a pretty good business. The real key for us is to get more and more content unlocked.

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When people talk about the war between flash and hard drives, we don't see it as a war between flash and hard drives. We see it as a war between physical distribution and electronic distribution, and so what we are really battling is DVDs and CDs and tapes and films.

If you put a TV show or a movie on digital, you've got to put it on an enterprise system somewhere. So there is a big enterprise play, too. For one video, you've got an enterprise drive, and you've got a backup. Then you've got a PC. Then you've got a backup to the PC, and then you've got an iPod. You've got five drives. You've just sold in the ecosystem, five storage solutions that are all hard drive-based. Cameras are another place we're trying to get a lot of traction.

Really? It feels like the camera has always been part of the flash world.
Watkins: But once you get into moving videos, the storage capacities are great. We're selling our 8 and 12 gigabyte drives to Sony for a video camera. If you want to be able to put 30 to 40 hours of video on a video camera, you need a lot of capacity.

The flash guys are talking about getting into notebooks. How realistic is that?
Watkins: Here is the problem you have: Flash has some power advantages and to some extent, it has a size advantage. But to be honest, in both cases they're kind of minimal to the real issue, which is cost per gigabyte. In notebooks, less than 10 percent of power is used by the hard drive. You could put a flash device in, but you're not going to save a lot of power because of the screen.

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