Enterprise SSD: Are Seagate and SanDisk Poised for Overperformance?

The enterprise SSD segment is booming. Can SanDisk, Seagate, and Western Digital benefit?

Apr 29, 2014 at 2:00PM

The growing demand for low-latency data storage solutions is driving the growth of enterprise-scale solid-state drives, or SSDs. Objective Analysis estimates that the market for enterprise SSDs will reach $3.5 billion by 2016 -- a terrific annual growth rate of 59%. Plus, enterprise SSDs are expected to command a 33% market share by 2016, up from 10% in 2012. 

In light of this expected growth, which of the industry giants -- Seagate (NASDAQ:STX), SanDisk (NASDAQ:SNDK), and Western Digital (NYSE:WD) -- stands to benefit the most?

A diversified giant
Seagate is a long-standing leader in the enterprise data storage industry. The company manufactures conventional hard disks, hybrid drives, and flash-based volatile and non-volatile memory modules for retail and enterprise clients, making it a formidable competitor in the memory segment.

Regarding market position, Seagate commands a gigantic 48% share in the enterprise data storage industry -- including HDD and SSD segments. Plus, the company generates about 39% of its overall gross profit from its enterprise division. Needless to say, Seagate has a solid foothold in the enterprise segment. 

To further strengthen its market position, Seagate plans to unveil its 3D NAND drives during the first half of 2014. This next-gen technology allows NAND manufacturers to breach the scaling limit, thereby allowing them to deliver cost-effective and scalable flash storage solutions for enterprise clients. 

The memory giant's entry in the 3D NAND segment, therefore, will not only future-proof its product portfolio, but also extend its lead over competitors. Plus, the 3D NAND industry in itself is a booming industry and is expected to grow 180.7% between 2013-2018. This positions Seagate as one of the prime beneficiaries of the thriving enterprise SSD segment. 

A flash pure-play
SanDisk, a pioneer in flash memory, is another notable beneficiary. The pure-play flash memory giant derives about 28% of its revenue from sales of its solid-state drives -- including retail and enterprise drives -- and commands a 16.7% share in the SSD industry.  

SanDisk upgraded its FlashSoft software in its previous quarter. At a price of nearly $130,000 for a three-year license, FlashSoft allows solid-state drives to be used as caching devices for VMware's virtualization software. This upgrade, in turn, increased the demand for SanDisk's SSDs and contributed to its stellar financial growth. 

On a year-over-year basis, SanDisk posted an impressive 61% jump in its quarterly SSD revenue. Its key growth driver, the enterprise SSD segment, recorded spectacular quarterly revenue growth of about 100% over the same period. 

In addition, SanDisk also unveiled its ULLtraDIMM SSDs earlier this year. Reportedly, these drives deliver about 800 times faster write latency than conventional hard drives. Currently, the market for such speedy drives is limited, but management expects ULLtraDIMM disks to become a key growth driver by 2015. 

With FlashSoft software driving its SSD sales, ULLtraDIMM disks future-proofing its product portfolio, and the development of its next-gen 3D NAND technology already under way, SanDisk seems well-positioned to take the enterprise SSD market by storm.

An uninterested peer
Unlike its peers, however, Western Digital isn't showing much interest in the enterprise SSD segment. Its product portfolio includes conventional hard drives, solid-state hybrid drives, and its latest, helium-filled enterprise storage drives.

Compared to typical hard drives, Helium drives reportedly consume 23% less power, run quieter, and reach densities of up to 6 TB. But, since they are similar to conventional hard drives by design, their read and write latencies are much slower than a typical SSD's.

Moreover, Seagate recently unveiled its 6TB air-filled drives using 6 platters -- compared to the seven platters found in Western Digital's Helium drives. This has exhausted Western Digital's lead over Seagate, and suggests that the former needs to innovate in order to thrive. 

Wrap up
The enterprise SSD industry is booming. So, it makes sense to invest in proactive companies that are en-route to capturing this expected growth. Investors, therefore, might want to consider investing in Seagate and SanDisk to reap balanced rewards.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Piyush Arora has no position in any stocks mentioned. The Motley Fool owns shares of Walker & Dunlop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information