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EMC, customers stung by hard drive shortages from Thailand floods

EMC has notified partners and customers that it will raise the list prices of its hard drives by up to 15% beginning Jan. 1 due to shortages caused by Thailand floods. The increases are expected to be temporary, depending on how long it takes damaged hard drive manufacturing plants to recover.

EMC vice chairman Bill Teuber sent an email to customers and partners stating the vendor has eaten price increases so far, but will begin to pass them along to customers after this month. He also wrote that EMC does not expect supply problems because it is the largest vendor of external storage systems, but it has to pay more for the available drives.

“EMC has absorbed the price increases that have been passed on to us and will continue to do so through the end of the month,” Teuber wrote. “Unfortunately we will not be able to sustain that practice. Beginning in Q1 2012 we will be increasing the list price of hard disk drives up to 15% for an indefinite period of time. While we hope that this increase is temporary, at this time we cannot forecast how long the flooding in Thailand will impact HDD [hard disk drive] pricing.”

Another email Teuber sent to EMC personnel said the price increases will be from 5% to 15%. He also wrote the increases will apply to all EMC product lines.

The shortage is expected to affect PC drives more than enterprise drives, but EMC enterprise storage rival NetApp lowered its revenue projection last month because of expected shortages.

Teuber referred to NetApp indirectly in his email, stating “Many of our competitors have already announced drive shortages and price increases and have stated that this will have a material impact on their ability to hit revenue expectations now and in the future.”

An EMC spokesman today said the vendor would give a full update on the supply chain issue during its earnings call in January.

The shortages are affecting vendors throughout the IT industry. Hard drive vendors Seagate and Western Digital have major manufacturing facilities in the flooded areas. Last month IT research firm IDC forecasted hard drive prices should stabilize by June of 2012 and the industry will run close to normal in the second half of next year. According to IDC, Thailand accounted for 40% to 45% of worldwide hard drive production in the first half of this year, and about half of that capacity was impacted by floods this November. Intel this week reduced its fourth quarter revenue forecast by $1 billion because the drive shortages will drive down PC sales.

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