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Seagate Contests Its Rivals with a New Drive for the Xbox One

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Effort to grow revenue

Seagate (STX) has expanded its portfolio of SSDs (solid-state drive) for the game console market, with its latest product targeting Microsoft’s (MSFT) Xbox One. According to the company, its 512 GB SSD drive for the Xbox One is focused on improving the console’s booting and loading speeds for an enhanced gaming experience.

The announcement of the 512 GB Xbox One external drive appears to be another of Seagate’s strategies to boost its revenue growth. The company’s revenue in fiscal 1Q17 fell 4.4% year-over-year (or YoY), to $2.8 billion. Weak demand for personal computers and stiff competition from its rivals Western Digital (WDC) and Pure Storage (PSTG) rattled Seagate in the quarter, leading to its downbeat top line.

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Seeking growth outside traditional markets

The chart above shows Seagate’s revenue for the last five quarters. Given the shrinking PC (personal computer) market, Seagate is looking for new growth opportunities outside its traditional markets, and it has identified console external storage as a viable market.

New console games are coming in larger sizes, requiring larger storage. Hardcore players are turning to external storage to supplement the internal storage of Microsoft’s Xbox One and Sony’s (SNE) PlayStation 4. The need for more storage for games has created a market that Seagate is trying to tap.

According to the company, besides storing data, Xbox’s 512 GB SSD drive will also improve the gaming experience, which it hopes will increase its consumer appeal. The new low-capacity storage for the Xbox One follows last year’s 2 TB and 4 TB SSD drives Seagate launched for the Xbox One.

Seagate’s new Xbox One storage will cost $200, and it will be available starting in November in several offline and online stores, including Amazon (AMZN).

Seagate posted adjusted EPS of $0.99 in fiscal 1Q17, beating the consensus estimate of $0.89. The company has been cutting costs to shore up its financials amid tightening competition.

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