The flip side of your argument is that maybe now that the disk drive sector has gone through a shakeout and consolidation it is able to exert a little more pricing power since the cut-throat competitive environment has been subdued. Since the capacity of the hardware continues to increase for NTAP, EMC, and the like, the disk drive component of their hardware is increasing as a percentage of total cost. The drive component is the lowest margin component of their hardware, so this will undoubtedly lead to lower margins for NTAP, EMC, etc. Maybe the drive manufacturers are trying to steal a portion of the juicy margins NTAP and EMC are enjoying.
Add to this the fact that there is more competition in the storage sector coming from Dell, Compaq, Sun, HP, IBM, etc, and it seems margins could be squeezed further due to competitive concerns.
And, of course, IT spending is slowing as has been highlighted virtually everywhere.
I'm not saying that this is the correct argument; it is just the logical contrast to yours.
Ali |
