Hard Drive Makers Cut, Then Extend (For A Price) Warranties

Maxtor, Seagate and Western Digital all cut the warranty periods of their basic ATA hard drive lines to one year, compared to the previous standard of three years.

On Monday, Maxtor launched an extended warranty program for its solution providers, said Stephen DiFranco, vice president of corporate marketing for Maxtor.

Under the Maxtor program, the one-year warranty of its DiamondMax, DM Plus and Fireball ATA hard drives can be extended by an additional one or two years at a list price of $19.95. DiFranco said there are no reseller discounts off this price, but solution providers can integrate the extended warranties into their systems as part of the cost of goods.

Western Digital also recently started offering a two-year extension to the new one-year warranties for its Protege and Caviar hard drives, said Richard Rutledge, vice president marketing at Western Digital.

List price for the extension is $19.95. Bulk buyers are offered discounts to the list price depending on quantity, Rutledge said.

Vendor officials said the cutbacks in the warranties on their basic hard drives are one way to cut costs, especially the expense of tracking warranties, and do not mean the drives themselves are any less reliable.

Darrin Bulik, technical marketing manager at Western Digital, said that at his and many competitors' companies, the cost of handling warranties exceeds their sales and marketing expense, and can eat up to 2 percent to 3 percent of revenue.

Because of the complexity of tracking warranties over time, Western Digital tracks 100 million records, each requiring 65 Kbytes in capacity, necessitating a 6.5-Tbyte database, said Bulik. "Our financials and manufacturing, using Oracle, are not close to that database in size," he said.

Maxtor's DiFranco said the warranties were adjusted to be in line with standard desktop PC warranties. "Customers were buying desktop PCs with one-year warranties, and with hard drives with three-year warranties," he said.

Seagate followed with an announcement that, starting October 1, all ATA hard drives would come with one-year warranties. Western Digital instituted a similar policy also on October 1.

Western Digital's Rutledge blamed his company for starting the move to offer three-year warranties on basic hard drives, which were put in place when the average drive was sold for $175 and offered 20-percent margins.

"Our move was based on erroneous data," Rutledge said. "We thought this was an inexpensive feature. I'll admit we were the idiots that started this mess. I'll also admit that Maxtor was the bravest to end this mess, followed by Seagate. I'm a little chicken, following the others."

Customers do care, said Dan Nester, president of Build To Order Manufacturing, an Atlanta-based white box builder. Nester said that his desktops came with two-year warranties, but he is now changing his promotional materials to reflect the one-year warranty on the hard drives.

Nester said he may offer an additional upgrade warranty for $10, but it's hard to change a policy. "People buy from you for certain reasons," he said.

The new warranties come at a time when more businesses are using entry-level drives for workstations and rack-mount servers, said Andy Kretzer, director of sales and marketing at Bold Data Technology, a Fremont, Calif.-based white box builder.

Kretzer said he now has to re-evaluate his warranties. "We offer three years on all desktops and servers, except all-in-one or mini PCs," he said. "We have to figure out how much buffer stock to keep. This will definitely cause us to consider offering extended warranties for hard drives."