Samsung chops Canadian distributors of hard drives

Two Samsung partners reacted tentatively after learning the company’s hard drives will have to be imported from its Korean headquarters rather than through Canadian distributors.

Chris Monette, purchasing manager at Calgary-based Memory Express, initially said it could be a mistake to leave partners without a distribution option here, but he wanted to speak with Samsung before making further comment.

“They’ve been a big part of our business and I hope they continue to be. Hopefully it works out to benefit both us and them,” said Monette.

Samsung account for 40 per cent of the company’s disk drive sales.

Jack Lee, vice-president of marketing and business development at Vancouver-based NCIX, said he is also anxious to speak with his Samsung rep about how the decision affects supply and warranty.

“We move (such) a sizable amount of Samsung product that it would make an impact,” said Lee. Roughly 20 per cent of NCIX hard drive sales come from Samsung. “They’re not our main line but they’re outstanding drives and have a great place in the market.”

Lee added that though the drives are not high-performance, “they are very reliable, well-engineered, quiet and offer great warranty.”

Competition in the hard drive market been intense for the past 20 years and became tighter earlier this year when Seagate Technologies bought Maxtor and decided to run two lines of products.

Sales of drives this year in Canada have been described by Partner Research analyst Michelle Warren as amazing. First quarter shipments were up up 31 per cent over 2005, and total shipments for 2006 are forecast tohit 2,287,000 units, up 12 per cent over 2005

However, Samsung sales lag far behind leaders Seagate, Western Digital and Maxtor. Those three have a combined 76 per cent of the market, while Samsung has 10 per cent.

According to Samsung Canada, the change in approach to managing the hard drive business from its headquarters is to streamline its business by leveraging the company’s global expertise in supply chain management, logistics and production.

Bob Park, head of IT marketing at Samsung Canada, said he expects some growing pains and initial shock from the partner community, “but in the mid to long term its going to be less expensive for them and more efficient.”

Park added that in the hard drive market the number of players has come down exponentially.

“Only the fittest survive and ultimately Samsung wants to be there. By making these changes we think its going to have that long- term effect,” he said.

Samsung Canada has yet to finalize the exact distribution network for its partners. “The only announcement we’re making is the change in process from local management of the supply chain to managing HDD (hard disk drives) as part of the global network and taking advantage of the global infrastructure that is available,” he said.

Park characterized the move as proactive rather than a reaction to the competition, namely Seagate’s purchase of Maxtor.

“In order to remain ahead of the game you have to economies of scale so moving into 2007 we want Samsung hard drive products to be placed in the position where not only we can compete but add value in different ways, and this was the best way to do it,” he added.

Meanwhile this week Seagate released three MobileMax 2.5-in. notebook drives, in 40-, 60- and 80GB capacities with 2MB of cache.

They are the first notebook drives under the Maxtor brand and will be sold exclusively through the channel. In addition, Seagate overhauled the Maxtor DiamondMax PATA and SATA desktop hard drives in sizes from 40 to 320 GB with either 2GB or 8GB caches.

The new desktop drives use Seagate’s perpendicular data storage technology Maxtor didn’t have. That allows them to have fewer platters and heads than comparable sized drives that array data horizontally.

Seagate is positioning the Maxtor brands as mainstream lines for volume sales, leaving its Barracuda, Cheetah and Momentus lines as higher-priced, higher capacity brands that will be first with new technology.

“Our intention is to maintain and grow the Maxtor (market) share we acquired,” said Marc Jourlait, Seagate’s vice-president of segment marketing. We think the combination of new refreshed product line and the addition of the notebook line, new incentives will help us grow both the Seagate but more particularly the Maxtor business.”

No Canadian retailers or resellers will have to be dropped as a result of the Maxtor acquisition, he added, because only 11 per cent of the channel carried Seagate and Maxtor lines. Nor will any of the Canadian distributors of the now-combined lines, which include Ingram Micro, Tech Data and Synnex.

In fact Seagate is trying to get system builders who only carried one line to add the other. “So the Canadian market is going to benefit from additional coverage in specific geographic as well as vertical markets,” Jourlait said. “Canada should see a net increase in the number of our partners.”

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