Seagate poised for boom
Commentary: Four factors driving disk drive demand
By John C. Dvorak
Last Update: 12:01 AM ET Jun 15, 2006
BERKELEY, Calif. (MarketWatch) -- Within the disk drive industry it's widely believed that any hard disk company that is solvent will see its stock make a move every year in the fall until the beginning of the following year.
While this doesn't always happen, it does happen a lot; perhaps as part of a self-fulfilling prophecy or maybe a normal cycle.
Whatever the reason, Seagate (STXseagate technology shs
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
STX ) looks to be poised to follow this pattern, if its new lineup is any indication.
The company recently acquired competitor Maxtor, one of my favorite drive makers and one of the companies that popularized stand-alone USB/Firewire drives. Maxtor will continue as a stand-alone brand under Seagate auspices, for the time being. Maxtor fills various holes in the retail line-up for Seagate and makes Seagate the big gorilla in the disk drive business with an estimated 40-percent market share of the $30 billion market.
I like what I'm seeing. Also CEO, William D. Watkins, is exuding confidence, a good sign in a difficult business.
Currently the companies competing in this industry are Toshiba (TOSBFtoshiba corp shs
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
TOSBF ) , Hitachi (HITHitachi, Ltd.
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
HIT ) , Samsung, Fujitsu and Western Digital (WDCWestern Digital Corporation
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
WDC ) . All are moving into what is termed perpendicular recording technology which allows the data to be stored vertically within the magnetic lattice of the drive platter.
Perpendicular technology is hardly new but its implementation has been long in coming. It will have an immediate impact by initially doubling all the capacities of new drives.
For the last few years the need for large capacity drives has not been as great as the capacity increases themselves. This left users with drives that were mostly empty with no real reason for the user to upgrade or expand. Four things will end this stagnation and force an upgrade cycle to the benefit of all the drive makers.
The first is Microsoft Vista. Although the new operating system is slated to be generally released in 2007 it is already available as a public beta. Microsoft Vista requires a minimum of 55 gigabytes on the hard disk to operate at all. This should result in an immediate upgrade of all the 80 GB systems out there. I have a public review underway. Click here for more information.
The second thing happening is the change in digital photography habits. There is a huge 0effort underway to get people to shoot pictures in RAW, an unprocessed format often called a "digital negative."
Everyone is promoting the use of a DSLR camera shooting 6-8 megapixel images in this RAW format. For an average 8 megapixel image this changes the storage requirements from around 2 megabytes per image to around 14 megabytes per image. It adds up.
And the third trend is the emergence of multimedia use. People are gathering more files from the Internet than ever before. These include a lot of large multimedia files including various podcasts as well as audio and video clips. The trend is solid and will be further exacerbated by the fact that these files are getting larger and larger.
The fourth and final factor is the sudden need for massive backup. These large drive are nearly impossible to backup with CD's or DVD's and only expensive tape backup is practical. But those systems are mostly developed for enterprise users.
The bulk of the market will decide to simply get another hard disk and let the hard disk maintain a complete copy of the main drives.
This need for backup drives is more important than ever as people are relegating their family photos onto these systems. Nobody wants to hear, "Daddy, what happened to granny's pictures? Where are they? I miss her."
When Microsoft rolled out Windows 95 the all the drive makers benefited and the normal fall boomlet was extended into the next year. And while this industry is always seen as a long term turkey for investors it does surprise people every once in a while.
This should be no surprise. |
