One stock in my portfolio is out to kill another.
Last week, IBM (NYSE: IBM) announced a breakthrough innovation in data storage that, if commercially viable, could render useless flash memory drives from SanDisk (Nasdaq: SNDK) and hard disks from Seagate (NYSE: STX) and Western Digital (NYSE: WDC).
Wonderful.
At least the technology is cool. Big Blue says the idea is to store information on a subatomic wire track. Think of it as nanotech for data storage, with the effect being, over the short term, a tenfold increase in capacity. Researchers believe a hundredfold increase is possible.
Press reports are breathlessly hyping the breakthrough technology, dubbed "racetrack." Mac watcher Apple Insider, parroting IBM's claims, writes that "the technology could pave the way for devices such as digital media players that can hold about a half million songs, cost far less to produce than today's models, and run on a single battery charge for weeks at a time."
Nice. But is it really fair to be giving IBM so much credit for a technology that could take five to 10 years to appear in commercial devices? I'd say so. Lead researcher Stuart Parkin has seen big breakthroughs before. In 1989, he invented a device that would ultimately be used to increase a thousandfold the data-storage capacity of magnetic disk drives, Information Week reports.
And it's not as if we didn't have fair warning that a breakthrough was coming. IBM filed patents related to "racetrack" as early as 2004. And Silicon Valley forecaster Paul Saffo last month predicted that within a decade, we'd all be carrying portable supercomputers.
Only with a geometric increase in data-storage capacity could such a tectonic shift be realized. And that's the sort of geometric increase that IBM has just invented.
So, Seagate and Western Digital could be in trouble. As may be SanDisk, Spansion (Nasdaq: SPSN), and Micron Technology (NYSE: MU). Intel (Nasdaq: INTC), meanwhile, is experiencing tough times as a result of rock-bottom prices for flash technology.
I could hate IBM for disrupting Seagate and the rest of the data-storage industry. But as a tech investor, I know I shouldn't. Innovation brings disruption -- and, with it, billion-dollar opportunities.
Welcome to the next one.
Get your clicks with related Foolishness:
- The great NAND flash rush of 2006 ended in a bust.
- IBM's supersized buyback looks pretty smart right about now.
- It's a beautiful Big Blue world.
