Exclusive Update
The continuing worry expressed for Seagate Technology (NASDAQ: STX) is the expected decline of the PC, a traditionally large market to sell hard-disk drives into. The rise of tablets and the cloud, where less is stored locally, is seen as a threat to this. And that's true -- up to a point. But Seagate CEO Steve Luczo said in the last earnings conference call that this should not be as big a worry as it's made out to be. "I don't know that I agree with all the naysayers. ... It's really what the PC [is] evolving to. And I think these convertible platforms that become tablets and notebooks and have onboard storage are very compelling."
Not only that, but if you have more stuff stored in the cloud, you have to have the storage capability to hold it all. Luczo again: "So as the cloud deployments continue, that market continues to grow."
Finally, more and bigger video is coming soon, as video delivery moves more to streaming. "Movies today," says Luczo, "in HD are 20 gigabytes to 30 gigabytes, and 4K [video format] at just average frame rates is 100 gigabytes to 200 gigabytes. So, it just gives you a feel for the challenges we have going forward to provide storage people are going to need."
When the company reported second-quarter results for fiscal 2013, it said that it had shipped over 47 exabytes of storage (a 59% year-over-year growth) with an average of 823 gigabytes per drive shipped. Just as pleasing was a decrease of 10% in the level of finished goods inventory. This is good because it's this inventory category that, when it stacks up thanks to buyers cutting back, can lead to lower selling prices in the future.
Addressing demand, management said that petabyte growth is continuing because of increased data consumption and creation, as well as more Internet connectivity worldwide. The storage need from this is growing faster than drive data density growth, which translates to more hard-disk drive demand. So, as Luczo has said, hard-disk drive sales are not just tied to PC sales.
Finally, the company also announced that it was partnering with Virident Systems as Seagate advances its strategy to offer a wide range of solid-state drives. As these continue to advance in drive capacity and prices come down (hard-disk drives are still cheaper per gigabyte of capacity), Seagate expects to be a major player.
