On Wednesday, disc-drive manufacturer Seagate Technology (NYSE:STX) announced that it would use "perpendicular recording" to increase the storage capacity of its drives. The company has already prepped a 2.5-inch, 160-gigabyte drive for laptops, and intends to be among the first to roll out other data storage products that take advantage of the new technique.
Without getting too tech-geeky about it, perpendicular recording improves on current storage technology by allowing bytes of information to be stacked on a disc drive vertically, like a skyscraper, rather than horizontally, like, um, a strip mall.
Good for Seagate, of course, but its particular block is crowded, and fierce competition is making rent (to stick with the metaphor) increasingly cheap. In addition to well-heeled competitors such as Toshiba (OTC: TOSBF) and Hitachi (NYSE:HIT) -- both of which have perpendicular plans of their own -- scrappier rivals such as Western Digital (NYSE:WDC) and Maxtor (NYSE:MXO) might soon join the fray.
But near mid-day, investors seem fairly excited by the Seagate news, lifting its shares out of the doldrums they suffered yesterday when the firm's new-products announcement wasn't accompanied by a change to its earlier fourth-quarter outlook.
That outlook -- earnings per share of $0.50 on revenue of $2.1 billion -- is certainly solid. But while Seagate seems to be leading the perpendicular pack at present, that doesn't change the commodity-like nature of the hard drive business. Rather than going gaga over new technology, investors should scan the competitive landscape -- and insist on a steep valuation discount -- before storing their moola here.
Other bits and bytes of techno-Foolishness:
Shannon Zimmerman , lead analyst of the Motley Fool Champion Funds newsletter, owns a Maxtor external hard drive but none of the securities mentioned above. Click here to scan the Fool's disclosure policy .
