Data Storage & Security Needs Will Lift External Hardware Storage Market
The total external storage hardware market has been rising consistently over the years, growing from 2 billion gigabytes (GB) in 2005 to around 8 billion GB in 2008, an annual growth rate over 50%. The growth rate slowed in 2009 due to the recessionary economic environment, but we expect the external storage disk market to bounce back in the years ahead. Rising demand for storage will likely be sparked by exponential growth in digital information as well as a greater need for data security. Key players like NetApp (NASDAQ:NTAP), EMC (NYSE:EMC) and HP (NYSE:HPQ) are likely to benefit from this positive trend.
NetApp’s strength in desktop virtualization and its unified storage strategy under a single OS will help the company boost its external hardware market share. While we expect the total hardware storage market to rise to around 165 billion GB over our forecast period, Trefis members expect the market to inch slightly higher towards 178 billion GB, implying a 5% upside to our price estimate for NTAP stock.
We maintain a $64.48 price estimate for NetApp stock, well ahead of market price.
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Rapid Growth in Digital Information
Digital information created and replicated each year is growing at a rapid rate. The number of total global Internet users has risen ~5x from 360 million users in 2000 to 1.9 billion Internet users in 2010 at a phenomenal CAGR of 444%. As broadband penetration increases, people are able to exchange larger amounts of data as well as indulge in heavier data-driven Internet usage such as watching movies, downloading songs or uploading photos. This is causing a phenomenal rise in the amount of data generated and stored.
Data Protection Will Boost Demand for Storage Capacity
We believe that increasing concerns about data security will also drive the need for external disk storage as digital information is in constant motion throughout its lifecycle, often leaving the secured network perimeter by laptop, PDA, e-mail or backup tapes. Security practices that focus on protecting the perimeter that surrounds the datacenter through the use of VPNs, firewalls, and antivirus software are no longer sufficient. There is a serious need to protect the information itself, wherever it travels, inside or outside the enterprise. Hence information security becomes a critical part of the overall infrastructure management.
Trefis Community Forecast
Trefis members predict the total storage market (GB) will increase from 16 billion GB in 2010 to 178 billion GB by the end of our forecast period, compared to the baseline Trefis estimate of an increase from 165 billion GB during the same period. The member estimates imply an upside of 5% to the $64.48 Trefis price estimate for NetApp’s stock.