Disk Drive Makers
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Date updated:05-12-2007

From Barron's 5-14-07

Why Disk-Drive Makers Have Years to Run.


"Reports of the disk-drive business' demise have been greatly exaggerated. Since the beginning of the year, the No. 1 and No. 2 drive makers -- Seagate Technology (ticker: STX) and Western Digital (WDC) -- have seen their stocks decline 16% and 11% respectively, on worries that personal-computer sales are slowing substantially. Some analysts have even suggested that the newer kind of computer chip known as "flash" memory could completely replace drives in personal computers -- and put Western and Seagate out of business. But PC sales are doing just fine, and flash -- in great part owing to its cost -- is not going to replace disk drives globally for years to come."

symbol name last price % change open
  • +
  • STX
    Seagate Technolog
  • $15.59
  • -2.87%
  • $15.86

"Seagate, which sells about a third of the industry's units, is generally regarded by investors and analysts as the technology leader. The global PC market is "healthy" and will likely grow at a stable 11.1% this year over last, says IDC's director of PC research, Loren Loverde. Global PC sales rose a better-than-expected 10.1% in the first quarter, faster than the 8.5% forecast, according to PC analyst Mikako Kitagawa with research firm Gartner."

People owning STX also tend to own: AHMAIZALBAMPAVTAXCABBI

TheStreet.com Rating: D What is this?

  • +
  • WDC
    Western Digital C
  • $37.05
  • -0.59%
  • $36.96

"Once investors come to appreciate these facts, Western Digital shares could appreciate another 20% or more from a recent price of $18.10 per share. Western is cheaper than Seagate by a wide margin, trading at a two-year-low price-to-earnings multiple of about 9.4 times the next four quarters' estimated profit per share -- below its five-year median of 11.6 times, while Seagate is near its median of 12.2 times. "Western has an attractively valued stock for a company that is one of the premier players in a market that's set to grow at least 10% a year for several years," says Citigroup analyst Paul Mansky, referring to the expected ramp-up in disk-drive unit sales."

People owning WDC also tend to own: MIIBHICVXSBLVLOFMDPWEI

TheStreet.com Rating: B What is this?

Portfolio not tracked!

05/18/2007 15:55 PM CDT Asked by seblaf
The issue as I see it is consumer demand, while disk drives have MUCH larger sizes and incresing YOY. Software and Multimedia has not grown much, allowing users to make due with initial hard drive sizes. a few years ago (before the bubble) it wasnt uncommon for someone to have multiple drives or upgrade drives yearly for extra storage. I do not see any catalysts that would change this pattern short term.

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