Seagate has extended the warranty on internal desktop and notebook hard drives to five years. But the announcement has been dismissed as marketing spin by its competitors.
The world’s largest manufacturer of disk drives controversially cut warranties on personal storage products to one year in 2002, but has now ratcheted up the cover period on all drives sold since the beginning of June.
“Our new five-year warranty announcement reflects feedback we have received from our channel partners and customers about how important reliability is for their storage purchases,” Seagate’s general manager of South Asia and Australia, Robert Yang, said. “Our objective is to add value in ways that are important to our partners and customers.”
While resellers will be offered full return or exchange coverage for the full five-year term, the fine print reveals that replacement drives will not be offered to distributors beyond three years. Instead, they can only expect a credit of 25 per cent of the current value of the drive if a request is in the fourth year, or 10 per cent in the fifth.
The sliding credit returns and credit-only periods have rivals wondering if the announcement will be detrimental to a channel already under pressure to retain margin.
“It doesn’t seem like such a good deal to me,” Fujitsu’s general manager of Australia and New Zealand, Michael Yell, said. “If you look at our large global accounts, most of them are asking for shorter warranties and a better price.”
“Our stance is business as usual,” Samsung’s sales director of CE and IT, Norm Krieke, said. “We held onto our three-year warranty when Seagate, Maxtor and Western Digital went down to one year.
“I can’t see the rest of the market moving — Seagate will have to ask itself if this gives them the increases in revenue they want. I can see them reverting back.”
Statements from other manufacturers contacted by ARN, including Western Digital and Hitachi, said they were assessing the announcement and considering their position.
Managing director of Westan — a Fujitsu, Samsung and Western Digital distributor — Victor Aghtan, said he hoped other manufacturers did not follow suit.
“All distributors are making slim margins already and have to take care of returns — it’s bad news. It’s a worst-case situation,” he said. “I wonder if it is to recover market share — if so, it is a waste of time because the competition will respond and they will be back to square one.”
Warranties are a differentiating factor in an industry where margins are low and competition is rife.
Altech’s Safa Joumaa suggested other manufacturers could follow suit, and said that wouldn’t be a bad thing.
“If you get a five-year warranty, you’re going to sell so many more the quantity will make up for it,” he said. “This gives people security — it’s psychological. Good on Seagate!”
Express Data’s general manager of marketing, Peter Master, agreed that it was a positive message for the market.
“The consensus here is that if a vendor is sticking up for their product then good for them,” he said. “But it’s unlikely any hard drive will still be around after five years anyway because they don’t tend to have long lifecycles. For a home user it could be OK — it’s something for nothing.”
Fujitsu’s Yell questioned the value of the scheme in a market where depreciation was so high.
“Think of it logically,” he said. “You’re buying a drive worth $200 — it’s a highly sensitive device so is likely to be worth $50 within the first year.
Yes it’s a five-year warranty but it’s a false economy. Read the small print. Ultimately it’s good for the end-user. In the end, it’s them that make us successful, but it’s not good for the channel.”
Krieke said that storage technology changed quickly and a drive sold tomorrow would be obsolete within five years.
“It’s time to get down to the details because that’s where the devil resides,” he said.
Seagate’s move will, however, challenge other manufacturers and force them to refocus on the quality of their hardware.
“Years of investments in research and development and industry-leading manufacturing processes, common design platforms, and advanced manufacturing allow us to develop the best quality and reliable drive,” Yang said.