Collaboration With Seagate Will Increase Micron’s Presence In The Growing Enterprise Flash Market

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Last week, Micron Technology (NASDAQ:MU) announced a multi-year strategic agreement with Seagate Technology to deliver new and innovative flash-based storage solutions. Both the companies will initially work on NAND and next-generation SSDs, but will soon engage in developing enterprise storage solutions by using NAND flash memory developed by Micron. In addition to collaborating on future products and technologies, the agreement enables Seagate to secure a strategic supply of NAND flash-based memory from Micron. Seagate has made a number of acquisition in the past, to enhance its portfolio of flash memory technology. [1] On the other hand, the collaboration with Seagate will accelerate Micron’s push in the enterprise market, expanding its portfolio of enterprise drive technology and platforms.

See our complete analysis for Micron here

Growth Potential In The Enterprise Market

The enterprise flash market was estimated to be worth more than $1 billion in 2014, and is expected to grow in excess of 50% per year for the foreseeable future. While Micron expects the client SSD market to drive a lot of volume for it, it believes that the enterprise Flash SSD segment offers greater opportunity for growth. The latter also offers higher margins. Enterprise products are used in heavy workload environments and comprised of several SSDs. In comparison, the client drives generally have a lighter workload and contain a single or only two SSDs.

New enterprise products, ranging from drives to caches to arrays, have led to greater integration of SSDs into corporate storage systems. The enterprise SSD market is expected to reach $4 billion in revenues by 2016, nearly six times that of 2011, while unit shipments are expected to increase by ten times during that period, to approximately 4 million units. IT managers have found that they can greatly reduce their IT spend while increasing throughput by replacing enterprise HDDs with SSDs. [2]

It is widely believed that the scope of SSDs has not yet matured in the industry and it will take time for it to gain momentum. But once it does, profit margins will decline resulting in lack of surplus suppliers in the market. When such a situation will be created, developers will combine flash memory technology with SDD. Thus, many analysts are of the view that more partnerships, similar to the Micron-Seagate collaboration, are expected to occur in the future. ((Micron Technology And Seagate Technology Collaboration, Wall Street.org, February 14, 2015))

Source: http://marketrealist.com/2014/04/micron-ssds/

Enterprise SSD Is Micron’s Biggest Focus Within The NAND Group

Micron’s SSD business ranges from hard disk drive (HDD) replacements with SSDs for clients to enterprise-class storage solutions. Micron firmly believes that the biggest focus within its NAND group today is growing a large and viable enterprise offering, which at present accounts for less than 5% of its NAND business. The company’s enterprise SSD solutions are suitable for server storage and caching, appliances, network-based caching, and mid to large-scale storage systems. [3]

Micron believes that it has built a pretty good product portfolio over time, mostly PCIe, SATA and SAS, which are all drive interfaces for the enterprise segment. PCI targets the higher end of the market while the SATA drive targets the lower end of the enterprise space. The company has the highest performance PCIe drive in the market today, but its SAS has been little bit limited just in terms of the timing of launching the products in the market. It continues to add more PCIe solutions to its portfolio and ramp up SAS.

Micron is aggressively working on developing its 16 nm TLC roadmap in an effort to drive overall NAND cost competitiveness, and expects to see client-based TLC SSD components in the market by spring of 2015. It continues to grow its controller and firmware organizations to help align its PCIe and SaaS roadmap to enterprise customer requirements.

Micron competes with Intel (NASDAQ:INTC), which has the largest market share in enterprise SSD, followed by Samsung (OTC:SSNLF). ((Must-know overview of Micron Technology: A DRAMatic growth story, Market Realist, April 24, 2013))

Our price estimate of $32.23 for Micron is in line with the current market price.

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Notes:
  1. Micron Technology And Seagate Technology Collaboration, Wall Street.org, February 14, 2015 []
  2. Enterprise SSDs to Grow Over 10x by 2016, Storage Newsletter []
  3. Must-know overview of Micron Technology: A DRAMatic growth story, Market Realist, April 24, 2013 []
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