The six-year old global distribution tie-up between Seagate and eSys has come to an abrupt end. Potentially, this development has got all the ingredients for becoming a blessing in disguise for competitors of Seagate. The question is, are the competitors capable of cashing in on this?
With US-based hard-disk drive major-Seagate Technologies moving ahead to terminate its global distribution alliance with eSys Technologies, the Indian IT channel is feeling that this development might help its competitors gain marketshare in the Indian region. However, when contacted, Seagate India's official spokesperson refused to comment on this issue.

“Today, it is all about how a vendor drills down to different markets and addresses the question of depth in its distribution. Now Seagate will have to make sure that its channel is not 'disturbed' by this development. Because, if the channel is disturbed, then the company might lose marketshare to other hard disk vendors like Western Digital or Samsung in the Indian region,” explained VK Bhandari, CEO, Kolkata-based Supertron Electronics.

“Seagate will have to ensure that its channel is not 'disturbed' by this development. Because, then it might lose marketshare to other vendors like Western Digital or Samsung” VK Bhandari  CEO, Supertron Electronics

“There would not be an immediate impact on the channel. However Seagate will have to quickly align itself according to the interest of channel so that the gaps are filled quickly” Manoj Gupta  CEO, Fortune Marketing

Speaking about the impact of this development, Manoj Gupta, CEO, Delhi-based Fortune Marketing said that there would not be an immediate impact on the channel. However Seagate will have to quickly align itself according to the interest of channel so that the gaps are filed promptly.

“As far as Seagate is concerned, Ingram and Redington are already there. eSys was billing in dollars from Singapore while the other two distributors billed in rupees. Now Seagate will have effectively fill this gap in the Indian region,” he added.

Bhandari from Supertron went on to say that Seagate would soon have to identify and appoint a new distributor who can quickly mould itself according to the market dynamics and start funneling the existing channel with Seagate's product range. “They have to do this soon in order to involve the current channel in a way that it is comfortable with,” he added.

While it may take sometime for Seagate to identify and put in place a distribution partner, its break-up with eSys might turn out to be a blessing in disguise for other hard disk vendors like Western Digital or Samsung to better establish themselves in the Indian market.

eSys India, in the meanwhile, has already signed up with Samsung for distributing their HDDs in the Indian region. “We have been selling Seagate for the past six years now and eSys has got a good depth in the Indian channel. Which is why it makes sense for us to add other brands like Samsung to our kitty,” added a source from Esys on conditions of anonymity.

Experts close to the industry feel that eSys was relying too much on Seagate when it came to revenues. “Up till now, a big portion of eSys' revenue was coming from Seagate. With this agreement no more there, now the company will really have to pull up its socks and think about other segments and products in order to remain competitive,” adds a source on conditions of anonymity.

Which is probably why within a week of its disassociation from Seagate, eSys signed a distribution deal with Samsung Electronics, to distribute its entire HDD range across North America, Canada, Latin America (except Brazil), and Europe Middle East and Africa (EMEA) excluding Ukraine, Russia, Nordic, France, Poland, Spain and Germany. Samsung earlier had distribution agreement with eSys in China, Hong Kong and Malaysia.
“This global distribution agreement with Samsung reinforces the market credibility that eSys Technologies has come to command in key markets worldwide. We will fully utilise our expertise, vast network and market knowledge to help Samsung increase its footprint in the HDD segment around the world,” said Neeraj Chauhan, Chief Operating Officer, eSys Technologies.

TJ Lee, VP-Sales and Marketing, HDD business, Samsung Electronics said, “eSys has an excellent distribution network and a team of highly efficient and capable personnel that will help boost the sales of our hard drives in key regional and international markets.”

Taking the Seagate-eSys imbroglio a bit further, Seagate had requested an intrusive audit of eSys' documents during the current quarter. eSys has declined access to a wide-ranging series of requests, citing in particular its commitment to the confidentiality of data relating to its customers and other vendors.

According to an official statement by eSys, there have been protracted negotiations starting 2nd October 2006, during which time Seagate has repeatedly refused to provide shipments of their products as required under the Agreements. Despite this, and as a sign of good faith, eSys has continued to pay Seagate for invoices raised, bringing down outstandings from $103 million to $50 million, a fact acknowledged by Seagate as well. eSys has a long history of meeting its commercial liabilities in full, and intends to continue this record.

eSys has strongly refuted any allegations of irregularities in its compliance of the Agreements. “Over the last six years, eSys has been supportive of Seagate's and Maxtor's strategies, even at some cost to itself and its shareholders. Unfortunately, the intrusive nature of the audit would not be justifiable to our worldwide business partners under normal business practices,” the official release states.

ZIA ASKARI

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