Storage Weekly Notes: Western Digital, SanDisk, Seagate In Focus

Hard drive maker Western Digital Corporatiom (NASDAQ:WDC) recently announced that its subsidiary HGST (Hitachi Global Storage Technologies) will acquire flash storage array company Skyera in an all cash transaction. SanDisk Corporation (NASDAQ:SNDK) acquired PCI Express (PCIe) flash storage provider Fusion-io for $1.1 billion in June, while Seagate Technology (NASDAQ:STX) acquired LSI’s SandForce PCIe business for $450 million in May this year. At the end of November, SanDisk announced its intention to release its 16 terabyte (1 terabyte = 1,000 gigabytes) solid state drive (SSD) by 2016. SanDisk’s 16TB by 2016 mimics Seagate’s marketing campaign “20TB by 2020” for laser-assisted hard drives. Below we take a quick look at the developments in the SSD market pertinent to these storage companies.

Western Digital

Western Digital acquired flash storage array maker Skyera in an all cash transaction in early December, a move that should help the company expand its presence in the SSD market. According to data compiled by Gartner, net revenue generated by Western Digital’s SSD sales barely crossed the $500 million mark in 2013, whereas Samsung’s (PINK:SSNLF) total SSD sales were higher than $3 billion in the same period. ^[1] Furthermore, Intel (NASDAQ:INTC) and SanDisk both generated over $1 billion in SSD sales during the year. In an attempt to gain traction in this fast growing market space, Western Digital a acquired three companies last year, including SSD manufacturer sTec, enterprise flash storage company Virident Systems and storage optimization software company Velobit. With Skyera’s rackmount SSD flash array business now under its belt, Western Digital has a more complete portfolio of SSD storage on offer, which could help the company gain share in the SSD storage market.

• Trefis has a $100 price estimate for Western Digital’s stock, implying a market cap of $23.3 billion. This implies about a 10% discount to the market price, which fluctuated between $112 and $114 during the week.

See our full analysis for Western Digital

SanDisk Corporation

SanDisk has witnessed solid growth in the SSD market over the last couple of years, with SSDs being the fastest growing segment within the company. SanDisk’s SSD revenues grew from about $440 million in 2012 to $1.2 billion in 2013. The growth has continued in 2014 thus far, with year-to-date (January through September) revenues nearly 65% higher than the year-ago period at $1.4 billion. Within the SSD division, SanDisk caters to both the enterprise market – such as data center storage – as well as client SSDs, which include solid state storage products for notebooks, desktop computers, tablets and smartphones. Despite being the third largest total SSD supplier in 2013, SanDisk trailed Intel, Samsung and Western Digital in the enterprise SSD market. ^[1] SanDisk was the fourth largest supplier of enterprise-grade SSDs in 2013, closely followed by PCIe connected SSD supplier Fusion-io. SanDisk acquired Fusion-io for $1.1 billion in June this year to bolster its enterprise SSD offerings. Management expects the acquisition to start being accretive to its earnings from mid-2015, which should help SanDisk overtake its nearest rivals in the enterprise SSD market.

The company has already announced that it will launch a 16 TB flash by 2016, a significant improvement on the 10TB currently made by IBM (NYSE:IBM). SanDisk management mentioned that the company will build the new drives on the same platform as its 4TB drive, which it launched back in April this year. ^[2] The company intends to double the capacity of these drives on an annual basis, with an 8TB drive scheduled for launch next year. With the triple-layer cell (TLC) technology that SanDisk has, the company can theoretically produce 24TB drives within two years. ^[3]

• Trefis has a $93 price estimate for SanDisk’s shares, translating into a $20.8 billion market cap. This is slightly lower than the current market price, which fluctuated between $99 and $101 during the week.

See our full analysis for SanDisk

Seagate Technology

Seagate had significantly lower total SSD sales than both SanDisk and Western Digital in 2013. ^[1] Furthermore, Seagate’s sales of enterprise SSDs barely crossed the $100 million mark in 2013, whereas competing hard drive maker Western Digital generated almost $500 million from enterprise SSD sales in the same period. The company bought the PCIe flash business from networking semiconductor and chip manufacturer Avago Technology (NASDAQ:AVGO) in a $450 million acquisition to fuel growth in the SSD domain. However, the company is also betting big on its laser-assisted hard disk drive, or heat-assisted magnetic recording (HAMR) drives, as an alternative to SSDs. These drives have a relatively higher (up to 5x) areal density of storage compared to traditional hard drives, and are cheaper than comparative SSD options. Currently, the highest areal density offered by Seagate is 1TB per square inch, while HAMR drives can store up to 5TB/square inch. ^[4] Seagate is targeting a 20TB drive by 2020.

• Trefis has a $58 price estimate for Seagate’s stock, translating into a $18.9 billion market cap. This is about 15% below the market price, which fluctuated between $68 and $70 during the week.

See Our Full Analysis For Seagate Technology

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. IBM officially biggest all-flash array shipper, The Register, June 2014 [↩] [↩] [↩]
2. It’s here, the 4TB FLASH drive: SanDisk rips sheet from the Optimus MAX, The Register, April 2014 [↩]
3. SanDisk vows: We’ll have a 16TB SSD WHOPPER by 2016, The Register, November 2014 [↩]
4. Seagate preps for 30TB laser-assisted hard drives, Computer Weekly, November 2014 [↩]