Portability & Cloud Services Lift SanDisk’s Outlook
Apple (NASDAQ:AAPL) recently announced the launch of its iCloud storage service at its Worldwide Developers Conference (WWDC) 2011. As a master at getting buzz behind new product launches, Apple put its weight behind one of the hottest themes in the computer industry with cloud computing. If Apple gains traction with the iCloud, we will likely see similar offerings from other players in the smartphones and PC market like Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), HP (NYSE:HPQ), Nokia (NYSE:NOK), Research in Motion (NASDAQ:RIMM) and Motorola Mobility (NYSE:MMI) among others. Below we look at how this move could impact NAND based flash storage and SanDisk in particular.
We currently have a $50.60 Trefis price estimate for SanDisk (NASDAQ:SNDK), the third largest player in NAND industry, which is about 15% above the stock’s market price.
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The demand for “high quality” media consumption on the move is likely to get a serious boost as a result of the iCloud and other competing services (already present or likely to follow). This will indeed increase the demand for some basic minimum local storage – for instant access when not connected to the web.
While the shift to the cloud will likely hurt hard disk drive (HDD) sales as users store less data on hard drives locally, SanDisk’s storage hardware will benefit as users adopt the Cloud because NAND based flash and used primarily in smartphones and media tablets. The cloud shift will also hasten SSD adoption among PCs as speed and portability requirements replace sheer volume as the top priority among consumers.
Also while cloud services may seem to reduce the average flash storage capacity per user as consumers store less media locally, the rapidly increasing file sizes (3D Videos, large sized image files etc.) are likely to counter any impact this is likely to have on local flash storage capacities. (High Def Entertainment Should Lift Data Storage Firms)
The company expects NAND flash consumption to increase 10 times by 2014 primarily driven by smartphones and tablets. [1]
We will update the SanDisk model to better reflect the impact of SSDs on the firm’s stock price. In the meanwhile you can see our complete analysis for SanDisk here.
Notes:- 2011 Analyst Day Presentation, SanDisk [↩]