Sarmad, Thanks for all the information in your post. STX has been on "fire" since the end of last October - up over 60 percent. Wish I had been on board for the ride.
Anyway, here is an article from IBD on Seagate.
<<Seagate Now On The Boom Side Of Long Boom-And-Bust History
BY BRIAN DEAGON
INVESTOR'S BUSINESS DAILY
Posted 1/19/2006
Bill Watkins says his main competitor is the company he runs, Seagate Technology.
"I worry less about our competitors than I do about us executing our strategy," said Watkins, chief executive of the disk-drive maker, in an interview. "If we execute, it will be hard for others to keep up."
Seagate's rivals aren't keeping up. In the $30 billion industry for hard-disk drives, Seagate is king and getting stronger.
The company's shares rose nearly 7% on Thursday to a 27-month high in reaction to an earnings report Seagate posted after markets closed Wednesday. Fourth-quarter revenue rose 25% from the year-ago quarter to $2.3 billion. Per-share profit rose 97% to 57 cents, beating estimates by a nickel.
"It's the strongest quarter in company history, by any company in the history of the disk drive business," Charles Pope, Seagate chief financial officer, said in a conference call.
100 Million Quarter
Seagate's performance reflects the industry's growing strength as more digital products depend on disk drives to store content and other data. The industry shipped a record 380 million drives last year, says Seagate, including 100 million last quarter alone. Industry revenue in 2006 is expected to rise 11% to $30 billion, says market tracker International Data Corp.
"Seagate is knocking the cover off the baseball on everything they touch," said John Donovan, an analyst with market research firm Trend Focus.
Seagate and other disk drive companies are riding strong times in consumer electronics. Disk drives are in game systems, TV sets, iPods and various other handhelds. Many analysts say cell phones, too, will soon come with tiny disk drives.
They're also in digital video recorders. With the Super Bowl and Winter Olympics next month and soccer's World Cup starting in June, more people will be buying DVRs to record the events, says Watkins.
"People don't realize how hot this DVR market is," he said.
Seagate shipped 3.5 million drives into consumer electronics applications last quarter, up 93%, of which 2.4 million were for DVRs.
"Storage is a new business. It's not your daddy's disk drive business anymore," said Watson.
Demand for drives will continue growing as consumers store more content, says Jack Scott, an analyst with research firm Evaluator Group.
The disk drive industry has long been a wild bronco to ride. Boom-and-bust cycles came like day follows night. During the 1980s, more than 130 disk drive companies competed. Most crashed or merged. Today, seven players exist. Last year, Seagate said it would buy rival Maxtor in a cash-and-stock deal worth $2 billion.
Even without Maxtor, Seagate, based in the Cayman Islands but with operational headquarters in Scotts Valley, Calif., is No. 1. It's followed by Japan's Hitachi, (HIT) which bought IBM's (IBM) disk drive business two years ago, and Lake Forest, Calif.-based Western Digital, (WDC) which Thursday traded at its highest stock price since 1997.
But the disk drive industry is still the poster child for self-destruction. Six months after a new drive is introduced, it's headed for obsolescence. But that forces constant improvements. Here's the result: In 1990, disk drives cost about $6.85 per megabyte. Today, it's far less than a penny.
Like the others, Seagate has taken its share of licks. But it never stopped investing heavily and setting the bar higher. During a conference call after Wednesday's earnings report, analysts focused on Seagate's newest technology, another industry first. Seagate can now store 160 gigabytes of data on one 3.5-inch platter — 80 gigabytes per side of the disk. Its competitors use two disks to store 160 gigabytes.
Huge Differential
That means Seagate is using one disk and two recording heads, while its competitors use two disks and four recording heads. That's a $15 difference in those components, says Pope. In an industry where profit margins are razor-thin and size matters, that's big. "That is a very large differential for us to work with," said Pope.
Seagate this week also claimed another first when it introduced a disk drive using a radical new perpendicular recording technology, which analysts call the biggest advancement in disk drives in 15 years.
The current recording method stores bits of data side by side. It's called longitudinal recording, and that's the way it's been done since IBM invented the disk drive 49 years ago. But bits are now so tightly packed that space is running out.
Perpendicular solves that because the data are stacked vertically. Laying the bits up and down instead of side by side provides more room to pack more data. It let Seagate make a 2.5-inch-wide, 160-gigabyte drive that fits snugly into notebook computers. The drive is call the Momentus, and Seagate started shipping it this month but hasn't named any customers.
Seagate's rivals are also developing perpendicular technology, but none have yet announced any shipping dates.>> |
