In a recent white paper, Hitachi (NYSE: HIT) notes that as demand for digital storage escalates to unprecedented levels, the term "terabyte" is quickly replacing "gigabyte" in the lexicon of our networked lives. While Internet traffic continues to grow at 50% per year, the sizes of the digital files being produced, shared, and stored are expanding as well.
The typical U.S. consumer stores 907 songs, 924 photos, 25 movies, and 7 games, while users in the world's most populous country, China, store 1,311 songs; 3,083 photos; 24 movies; and 22 games. To date, most hardware manufacturers have focused on the storage needs of large enterprises, but several companies are also targeting consumers.
Last week, Hitachi launched an improved 1-terabyte hard drive for desktop computing, followed by rival Seagate's (NYSE: STX) debut of the world's first 1.5-terabyte desktop hard drive. While these hard drives may at first seem massive, consider that one hour of television programming at the lowest quality setting consumes about 1GB of space, while high-definition eats up around 9GB. In other words, you'd need about 216GB to record the first two seasons of Dexter in high-def. As storage needs continue to balloon, within a few years, the 1TB hard drive may even become as antiquated as the 5 1/4" floppy is today.
To compete for consumer dollars, hardware manufacturers will have to contend with the new kid on the block: cloud computing. Under this model, consumers "rent" storage space through a service provider, such as Amazon's (Nasdaq: AMZN) Elastic Compute Cloud or Apple's (Nasdaq: AAPL) MobileMe service. Earlier this year, EMC (NYSE: EMC) heralded its intentions to enter the consumer cloud computing space when it acquired Pi, a developer of personal information management software.
Even in a down market, the need for storage continues to rise. Think of all the resumes and virtual home tours being posted right now. Longer-term investors who take the time to research which companies are best able to capitalize on this trend may find some bargains at today's price levels.
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