Storage Weekly Notes: SSD Market Presence Of Seagate, Western Digital, SanDisk

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Western Digital (NASDAQ:WDC) and Seagate Technology (NASDAQ:STX) announced mixed quarterly results in late January, with unit shipments witnessing limited growth. On the other hand, flash storage provider SanDisk Corporation (NASDAQ:SNDK) saw robust growth for its SSD storage products in the December quarter, even as weakness in its embedded storage division continued through the full year. Sluggish sales for the hard drive manufacturers were largely attributable to declining global demand for spinning-disk hard drives and a transition to SSDs. This was evidenced by a surge in SanDisk’s SSD revenues over the last couple of years.

Seagate recently announced a strategic partnership with chip maker Micron Technology (NASDAQ:MU) to deliver new and innovative flash-based storage solutions, including next-generation SSDs. [1] On the other hand, SanDisk’s management has given a conservative estimate for growth in its SSD storage division as it lost a major SSD customer in January. [2] Below we take a quick look at the developments in the SSD market pertinent to these storage companies.

Seagate Technology

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  3. How Has SanDisk’s SSD Division Performed Over The Last Few Years?
  4. What Is SanDisk’s Fundamental Value Based On Expected 2016 Results?
  5. What Will SanDisk’s Revenue And EBITDA Look Like In 5 Years?
  6. SSD, Embedded & Removable Storage: What’s SanDisk’s Revenue & Earnings Breakdown?

Seagate generated barely $100 million from SSD sales in 2013, where competing hard drive maker Western Digital generated almost $500 million from enterprise SSD sales in the same period. [3] 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. Additionally, the company recently announced a strategic partnership with Micron Technology, which would not only help the hard drive manufacturer to enhance its portfolio, but also help save costs due to vertical integration. Seagate will source NAND chips from Micron, which is a key NAND chip manufacturer with a 12% market share in the global NAND flash market. This move signals a definite shift in Seagate’s strategy to enhance its focus towards flash storage and solid state drives. The enterprise flash market was estimated to be about $1 billion in 2014, with robust growth expected over the next few years. [4] According to the Storage Newsletter, the enterprise SSD market could potentially grow to become a $4 billion market by 2016, which gives Seagate a vast market to cater to. [5]

  • Trefis has a $58 price estimate for Seagate’s stock, translating into a $18.9 billion market cap. This is slightly below the current market price, which fluctuated around the $61 mark during the week.

See Our Full Analysis For Seagate Technology

Western Digital

Western Digital has had a sizable presence in the SSD arena over the last few years due to its acquisitions in 2013, which included SSD manufacturer sTec, enterprise flash storage company Virident Systems and storage optimization software company Velobit. The company acquired flash storage array maker Skyera in an all cash transaction in December 2014, which should help the company expand its presence further in the SSD market. According to data compiled by Gartner, net revenue generated by Western Digital’s SSD sales was about $500 million in 2013, where Samsung’s (PINK:SSNLF) total SSD sales were higher than $3 billion in the same period. [6] Furthermore, Intel (NASDAQ:INTC) and SanDisk both generated over $1 billion in SSD sales during the year. 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.

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. 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. [7] SanDisk’s SSD revenues grew from about $440 million in 2012 to $1.9 billion in 2014. The contribution of SSD revenues to SanDisk’s net revenues has grown from 3% in 2011 to 29% in 2014. Despite a surge in SSD revenues in the last few years, SanDisk management expects the contribution of SSDs to remain at 29% in 2015 as one of the company’s major client SSD customers decided to end its partnership with SanDisk starting January. The company acquired competing SSD maker Fusion-io for $1.1 billion in June last year to bolster its enterprise SSD offerings, which would start being accretive to its earnings from mid-2015. The addition of the Fusion-io business to its enterprise storage should help offset the expected decline in client SSD revenues this year.

  • Trefis has a $89 price estimate for SanDisk’s shares, translating into a $19.1 billion market cap. This is slightly higher than the current market price, which fluctuated between $81 and $83 during the week.

See our full analysis for SanDisk

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Notes:
  1. Micron, Seagate Announce Strategic Alliance, Seagate Press Release, February 2015 []
  2. SanDisk Earnings Call Transcript Q4 2014, Seeking Alpha, January 2015 []
  3. IBM officially biggest all-flash array shipper, The Register, June 2014 []
  4. The Short and Exciting History of the Enterprise Flash Market, XtremIO, December 2014 []
  5. Enterprise SSDs to Grow Over 10x by 2016, Storage Newsletter, November 2012 []
  6. IBM officially biggest all-flash array shipper, The Register, June 2014 []
  7. IBM officially biggest all-flash array shipper, The Register, June 2014 []