You'd think that the industrywide drag Western Digital (NYSE: WDC) put on storage stocks this week would have set a firm ground floor for a less-than-impressive report from Seagate (Nasdaq: STX). But then you'd be wrong.

Yesterday's 3% swoon after Western Digital's report was actually just a warm-up exercise for today's 7% drop. In addition, Seagate's bad news dragged Western Digital down even further, despite the fact that we already had all the relevant information about that company's business two days ago. Remember, we're not talking about nosebleed-valuation growth phenoms here with everything to prove, but this is about two giants of a mature industry trading for less than their respective trailing sales. It ain't right, folks.

So what's the terrible news that inflicted this damage today?

Well, sales fell 10% year-over-year to $2.7 billion, and earnings took a severe beating, falling from $1.03 per diluted share a year ago to $0.31 per share in the just-reported second quarter. That sounds traumatic until you realize that Seagate actually came very close to meeting analyst expectations. The results also largely met management's own forecasts.

Seagate expects the total hard drive market to shrink a bit next quarter, dropping from around 168 million units this quarter to no more than 165 million drives in the coming period. Then again, Western Digital already predicted an even smaller market, topping out at 155 million units next quarter.

None of this sounds cataclysmic to me.

The two hard drive rivals have underperformed a rising market for the last year or so, lagging far behind memory-based storage darlings STEC (Nasdaq: STEC) and SanDisk (Nasdaq: SNDK). Even boring old tech-conglomerate Hitachi (NYSE: HIT) has absolutely crushed Seagate's and Western Digital's returns.

It's a severe market imbalance that must be corrected in due time. There's blood in the storage streets, but nobody is bleeding. I have "outperform" ratings on both stocks in our CAPS system and remain convinced that they will help me beat the market in the long run.

All-star CAPS player and Fool contributor Anders Bylund holds no real-money position in any of the companies discussed here. The Fool owns shares of Western Digital. 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. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.