Seagate (NASDAQ:STX) has been operating in the maturing hard drive market for a long time, and, along with its main competitor Western Digital (NASDAQ:WDC), it will likely collect reliable profits from this business for years to come. But, this doesn't mean that Seagate has itself become a staid, unexciting company, as several recent initiatives from the company show. What are the new developments within Seagate, and what do they mean for the company and its competitors?

The biggest news is two acquisitions that Seagate will be closing this year. The first of these is Xyratex (UNKNOWN:XRTX.DL), a provider of hard drive testing equipment and disk enclosures. The $374 million acquisition is expected to provide additional vertical integration by bringing testing expertise in-house. Seagate's Dave Mosley called this an "increasingly strategic capability" as hard drive capacities and test times continue to expand.

The second acquisition is LSI's flash business, which Seagate will buy from Avago for $450 million in cash. Until now, Seagate has mainly tried to develop its flash technologies in-house, but it has so far failed to become a major player in the market. The LSI acquisition should immediately boost Seagate's offerings and presence in the SSD market, and the combination of the company's existing SSD business and the acquired SSD controllers is expected to generate at least $150 million in revenue in fiscal 2015.

Both of these acquisitions put some pressure on Western Digital. According to Western Digital's management, contractual agreements that were put in place before the Xyratex acquisition should ensure continued supply of test equipment, but, for the long term, Western Digital will not be satisfied with relying on its main competitor for a key component of its production stack. As for flash, Western Digital currently has a lead relative to Seagate thanks to three flash-related acquisitions in the last year, but Seagate's LSI acquisition will introduce another serious player into the already-crowded SSD market.

Hybrid drives
Along with SSDs, Seagate has also been working on hybrid drives, which combine flash memory with a hard disk. The flash memory acts as a cache for the hard drive, and improves overall speeds and system responsiveness, while reducing power consumption by allowing the hard drive to spin down more often.

Seagate expects that, within three to four years, the majority of its portfolio will consist of hybrid drives. So far, hybrid drives have mostly been used to enhance performance in notebooks, though the smallest form factor of hybrid drives, which is only 5 millimeters thick, is also being deployed in tablets.

Western Digital is also in the hybrid drive market, but it doesn't seem to have found success there like Seagate. While Seagate's management has been pleased at the level of hybrid adoption in both client and low-end server segments, Western Digital has called its own hybrid product not compelling and its hybrid sales disappointing. Western Digital has stated they will continue to evaluate their hybrid offerings in order to make them more attractive to customers, but for now, it seems that Seagate has the lead.

Reinventing the HDD architecture
A third interesting initiative from Seagate is its Kinetic Open Storage Platform. Basically, this is an attempt to radically reinvent the typical storage architecture to make it more appropriate for the modern, cloud-based data center. Kinetic strips out many legacy aspects of traditional storage systems and moves much of the storage-related processing to the drive itself, while using Ethernet as the physical interconnect.

Seagate announced Kinetic last October, and the first Kinetic-based storage system product was introduced at the CeBit conference in March. Then, in May, HGST, a Western Digital subsidiary, demonstrated an Ethernet drive technology that it believes will be more flexible and attractive than Seagate's Kinect. But, HGST has not released this as a product yet, so time will tell whether HGST is right, or whether Seagate will reap the first-mover advantage with this innovative technology.

In conclusion
Seagate is seriously expanding into the SSD market with the acquisition of LSI's flash business, and it seems to be finding success with hybrid drives, unlike Western Digital, so far. Also, thanks to its Xyratex acquisition, Seagate will be putting pressure on Western Digital's sourcing of hard drive test equipment. Finally, Seagate's innovative Kinect architecture might prove transformative for cloud data centers, and has left Western Digital playing catch-up.