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"So, that puts the industry in an allocation environment at least through Q1," he said, according to the transcript. "Last month, we made strategic purchases of inventory, and pulled in supply from our hubs. This drove an increase in our end of quarter DSI [days sales of inventory]. We also have teams working with the impacted suppliers to manage our hard drive supply chain, and qualify news sources of supply."
Eric Kelly, president and CEO of Overland Storage, which on Wednesday reported its first fiscal 2012 quarter financials, said that the entire industry is scrambling to secure hard drive supplies.
"Because of that shortage, the prices have approximately doubled over the last 30 to 45 days," Kelly said. "The good news is, our executive team, me specifically, and our VP of operations, have worked for several disk drive companies. We understand the supply chain. We have very good executive contacts to reduce the risk to Overland for getting supply."
Even so, estimating the impact of the shortage on gross margins is difficult as supply and pricing are constantly changing, Kelly said.
"The orders that came in through the end of October, we honored those orders," he said. "We increased our prices subsequently after that to take into account the increase in disk drive pricing. We're doing everything we can to ensure that we protect our margins. But until the industry settles down, you manage it the best you can."
Kelly said he expects the disk drive supply issue to impact the storage industry through June of next year. "You just monitor it on a hourly and daily basis to make sure you manage the business appropriately," he said.
With hard drive prices increasing on a daily basis, it is hard to price storage systems for which a customer places an order on one day but will not receive for another two weeks, Kelly said.
"[People say it's like] trying to catch the falling knife," he said. "This is like trying to catch the rising rocket ship, trying to figure out how high it is going to go. We monitor this twice a day in terms of what's going on with prices ... This is a process we're going to have to keep in place through the middle of next year."