Can Seagate Swim With the SSD Sharks?

It's never too late to jump aboard the bandwagon. Data storage giant Seagate Technology (Nasdaq: STX  ) has announced its first solid-state drives (SSD) and the intention to come up with more.

That's after years of sitting on the SSD sidelines while competitors like Western Digital (NYSE: WDC  ) jumped right in. The SSD market is still in its relative infancy, however, because the Flash memory chips powering these ultra-fast and low-power storage devices cost much more than the traditional spinning magnetic platters of a regular old hard drive. According to Gartner research quoted by Seagate, the enterprise SSD market should hit $1 billion in 2010 sales.

Though late to the party, Seagate is arriving in style. Using extra-fancy, high-quality memory chips, Seagate's Pulsar drive should outduel the finest SSD products from Western Digital, Intel (Nasdaq: INTC  ) , Samsung, and others by a wide margin for write-intensive tasks like video editing and large databases. The Pulsar also introduces a new idea: A capacitor inside the device stores enough power to let the drive finish what it was doing if power should go out. That's an enterprise-friendly feature designed to minimize data loss, and similar in spirit to how Google (Nasdaq: GOOG  ) runs its servers. This could be the start of a trend.

So Seagate has joined the enterprise segment of the SSD market, but the world's leading supplier of hard disks is staying out of the consumer market until further notice. You won't see Seagate Pulsars at Newegg anytime soon (hurry up and go public already, by the way!), though a few errant drives might end up at online auctions. The likes of Intel, Imation (NYSE: IMN  ) , and Micron Technology (NYSE: MU  ) will continue to divide and conquer the end-user market for solid-state drives in the meantime.

In the end, I fully expect SSDs to become the standard storage format, with hard disks being relegated to a low-budget, high-capacity niche. Seagate will embrace the new market by then, of course. The question is, will it be too late for the old-guard leader to join the revolution, or will Seagate's brand strength transfer to the new product segment unharmed?

I'm leaning toward a new world order where Seagate's stature is diminished, but what do you think? While SSDs may be making quite a bit of progress, there’s still a long way to go before they’re cost-competitive under most circumstances with the good old-fashioned hard disk drives of today. Discuss in the comments below, and boost your karma balance at the same time.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Google is a Motley Fool Rule Breakers selection. Intel is a Motley Fool Inside Value selection. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On December 09, 2009, at 9:45 PM, rchaudhary wrote:

    Unlike, magnetic platters, Seagate does not make NAND chips; which will make it difficult to compete with SAMSUNG and INTEL of the world.

    I am expecting Seagate to pick up Micron or someother NAND chip manufacturer to control its supply chain.

  • Report this Comment On December 10, 2009, at 11:08 AM, nostrildamus wrote:

    "pick up Micron or other NAND chip manufacturer"...hmm...bold statement! That would be a big structural shift, and not many NAND makers out there. Samsung, Hynix, Micron/IMFT, Toshiba/SanDisk. The ones that are on the same order of total market cap as Seagate, or bigger. Samsung..no. Hynix and Toshiba are woefully loaded down with debt and not good acquisition candidates unless they go through a bankruptcy or massive recapitalization, neither of which is likely given their implicit support from their governments.

    Micron manufactures NAND under a 50/50 JV with Intel. Maybe there is a future for some sort of JV with Seagate down the line, but as far as Seagate buying Micron (or other NAND maker) it seems to me the inverse is just as likely to happen. I don't see Seagate with the ability to buy a NAND maker anytime soon.

  • Report this Comment On December 16, 2009, at 12:27 PM, EquityBull wrote:

    Seagate should start heavy R&D expenditures now into SSD technology otherwise their future growth and ability to compete will falter.

    They should be purchasing a chip maker or doing their own R&D and planning capacity to make their own. They have to become a chip fab to control their own capacity and technology if they are to compete otherwise they will be held at the mercy of those they purchase chips from in the coming years.

    SSD is the future, period. I'm in IT and run servers. If you see the stats on something like the ioDrive or Intel X-25E or X-25M the performance is staggering compared to any hard drive. Also the other benefits including power usage, MTBF, etc all add up to a superior product in every way except for price right now. However as we know price will come way down and thanks to moore's law will eventually catch up to spinning platters in terms of real world use capacities.

    SSD is ready for the enterprise and consumer market right now albeit a bit costly for typical consumers. I'd bet that if any consumer put an SSD into their laptop or desktop they would feel the price was well worth it. They are that good.

    I hope STX gets on the bandwagon and has the visioin to pour investment into this. If not they will be a company relegated to the past for not adapting to future technology in time. Leading SSD co's now are INTC and OCZ.

    I'm long STX and unless they get on the SSD train in a big way in the next one to two years I'll be paring down my position. Timing the exit will be difficult but if STX does not control its supply chain and forge into consumer area soon they may be too late to catch up. Also they have to deal with the coming patent flood from other SSD makers. If they don't do the R&D and get some patents they will be left out there as well and forced to pay license fees.

  • Report this Comment On December 17, 2009, at 12:52 PM, summersnowflake wrote:

    In my mind, there is absolutely no doubt SSD will be the primary storage media in 3 to 5 years time and HDD will become a niche.

    I think Seagate is not only late, its management isn't really embracing SSD as passionately as they should. Seagate's leaders viewed SSD as a nuisance that hopefully will go away when the hype goes away. I know that because of my line of work.

    Suddenly they realized their best enterprise customers are betting their future on SSDs. Enterprise customers normally purchased SAS drives for their servers and storage systems, which Seagate dominates. A huge chuck of Seagate's profit comes from enterprise drives. Their PC drives are low margin commodity that can barely keep the lights on.

    Reluctantly, the company started to look into building their own enterprise class SSD just to show their enterprise customers they too have SSD in their roadmap. In their minds, however, Seagate hopes that SSD will only be a hype and magnetic storage will live on happily for the foreseeable future.

    However, this is wishful thinking. Today, there is beyond reasonable doubt that enterprise customers will move from SAS to SSD in a big way over the next few years. The benefits in terms of improved I/O provided by SSD far outweigh the cost differentials with HDD. This market trend will essentially kill the goose that lay the golden eggs for Seagate.

    Eventully, SSD will move to client PCs as well. It's just a matter of time. When you compare the cost per GB, HDD will be lower than SSD for a long time to come. However, there will be a time when SSDs will be able deliver "good-enough" capacity for an ordinary PC user at an acceptable price, which is typically around $35 to $40 at an OEM level. By then, there will be a mass migration to SSD, starting with portables.

    In addition, the ultra mobile computing devices, including netbooks, smart phones etc.. are the fastest growing segment of the PC market. In addition, with the growth in cloud computing, the ultra mobile devices and thin clients will not need the capacity provided by HDD. Naturally, they will choose SSD over HDD.

    Therefore, the urgency is for the HDD vendors to embrace SSDs and invest not just to have a product on their road map but rather for their survival.

    The Seagate I know of is still dragging their feet and have their head stuck in the sand. I surely hope this will change in a quick way as time is really running out for them.

  • Report this Comment On December 17, 2009, at 12:53 PM, summersnowflake wrote:

    In my mind, there is absolutely no doubt SSD will be the primary storage media in 3 to 5 years time and HDD will become a niche.

    I think Seagate is not only late, its management isn't really embracing SSD as passionately as they should. Seagate's leaders viewed SSD as a nuisance that hopefully will go away when the hype goes away. I know that because of my line of work.

    Suddenly they realized their best enterprise customers are betting their future on SSDs. Enterprise customers normally purchased SAS drives for their servers and storage systems, which Seagate dominates. A huge chuck of Seagate's profit comes from enterprise drives. Their PC drives are low margin commodity that can barely keep the lights on.

    Reluctantly, the company started to look into building their own enterprise class SSD just to show their enterprise customers they too have SSD in their roadmap. In their minds, however, Seagate hopes that SSD will only be a hype and magnetic storage will live on happily for the foreseeable future.

    However, this is wishful thinking. Today, there is beyond reasonable doubt that enterprise customers will move from SAS to SSD in a big way over the next few years. The benefits in terms of improved I/O provided by SSD far outweigh the cost differentials with HDD. This market trend will essentially kill the goose that lay the golden eggs for Seagate.

    Eventully, SSD will move to client PCs as well. It's just a matter of time. When you compare the cost per GB, HDD will be lower than SSD for a long time to come. However, there will be a time when SSDs will be able deliver "good-enough" capacity for an ordinary PC user at an acceptable price, which is typically around $35 to $40 at an OEM level. By then, there will be a mass migration to SSD, starting with portables.

    In addition, the ultra mobile computing devices, including netbooks, smart phones etc.. are the fastest growing segment of the PC market. In addition, with the growth in cloud computing, the ultra mobile devices and thin clients will not need the capacity provided by HDD. Naturally, they will choose SSD over HDD.

    Therefore, the urgency is for the HDD vendors to embrace SSDs and invest not just to have a product on their road map but rather for their survival.

    The Seagate I know of is still dragging their feet and have their head stuck in the sand. I surely hope this will change in a quick way as time is really running out for them.

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