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Seagate's goal: Hollywood's hard drive
Tapping a Tinseltown vet for its board could accelerate its drive into gadgets.
December 23, 2005: 12:56 PM EST
By Owen Thomas, Business 2.0 staff writer

SAN FRANCISCO (Business 2.0) - When Seagate named Frank Biondi, a former CEO of Viacom, Universal Studios and HBO, to its board of directors on Thursday, the news drew little notice.

But the move speaks to Seagate's ambitions, which go far beyond the computer world.

Seagate (Research) is a storied player in the storage business; its hard drives helped make the PC revolution possible. But in decades past, it was roiled by waves of overexpansion in the industry and inefficient operations it inherited through multiple acquisitions.

To right the company, CEO Bill Watkins first rationalized manufacturing. (He once disassembled two of his company's hard drives and found that out of 300 components, only two were shared between both models.)

But to get Seagate growing again, Watkins had to find a new market to tackle -- and he found it in consumer electronics.

As hard drives have gotten cheaper and smaller, gadget makers are putting them in all kinds of new devices.

Today, everything from digital video recorders to MP3 players to GPS devices sport hard drives -- and Seagate now gets about a sixth of its revenues from the consumer electronics business.

Seagate earlier this week agreed to acquire rival hard-drive maker Maxtor (Research). To be sure, the deal will bolster Seagate's workaday business of supplying drives to PC makers; Dell is Maxtor's No. 1 client. But it also extends Seagate's push into consumer electronics, since Maxtor currently has a contract to supply hard drives for Microsoft's Xbox 360.

Preparing for a star turn

So where might working with a Hollywood guy like Biondi lead Seagate?

In September, Seagate bought Mirra, a small startup that makes networked hard drives that can automatically back up your files and store music and photo libraries. Using Mirra's technology, Seagate could build more sophisticated hard drives that work with wireless networks.

Those kind of features could help Seagate tap still-nascent markets like cell phones. The industry has only begun to see a few models of cell phones with hard drives, but as wireless networks get faster and carriers hope to make money selling video and music downloads, phones will need vastly more storage than they have today.

Digital video recorders like TiVo also need an ever-growing amount of storage, especially as broadcasters transition to high-definition TV. HDTV is a storage hog; even compressed, an hour of HDTV video requires about nine times as much hard drive space as regular TV.

Ultimately, to drive sales of hard drive-equipped consumer devices like DVRs and cell phones, Seagate needs to make sure there's plenty of music and movies available in digital form. The entertainment industry is nervous about turning its wares into ones and zeroes, thanks to piracy and illicit file-sharing networks.

That's where a guy like Biondi comes in. As Seagate gets bigger with Maxtor -- and smarter with Mirra -- it will have to come to terms with Hollywood. Seagate's newest director can make sure it's ready for its star turn.

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