HDD Market Hurting As Tablets Sales Surge


Companies like Hewlett-Packard (NYSE:HPQ), Lenovo and Dell ( DELL ) recently experienced a drop in sales of their notebook PCs as a result of rising popularity and adoption of tablet devices among consumers. While notebook PCs seem to be the first victim of the 'tablet phenomena', the increasing adoption of tablets is also beginning to affect other IT businesses like the HDD market - despite the fact that global storage demand is increasing at unprecedented rates driven by large quantities of data being created and shared by consumers. A slowdown in HDD market will hurt disk storage system vendors like EMC ( EMC ), NetApp ( NTAP ) and IBM (NYSE:IBM) among others if they do not expand their storage hardware product portfolios to adapt to this changing trend.

Rise in Adoption of Tablets

In a recent report by research firm IHS iSuppli, the sale of solid-state NAND flash drives are projected to increase by 400% in 2011 driven by increasing adoption of tablets which primarily use flash memory for data storage. As a result the revenue growth for computer HDDs, a category including drives for PCs and servers, is expected to decelerate dramatically compared with 2010.

Revenue for computer HDDs is projected to reach $28 billion in 2011, up 4% from the $27 billion reported in 2010. However, the anticipated HDD growth this year is only about half the 7 percent expansion posted by the industry last year.

While we estimate the total disk storage systems market (in gigabytes) to grow by as much as 40% the growth in sales is expected to be much lower as a result of reduction in price per GB. However, if the total disk storage systems market grows at a much slower rate due to lower demand for disk storage, there could be significant downside to our estimate for data storage firms like EMC and NetApp.

Other Factors: Cloud and SSDs

In addition to the influence of tablets, HDD sales are also impacted rival storage devices such as flash memory and solid-state drives that are eating into traditional hard-drive strongholds like netbook computers as well as enterprise storage.

Another factor that has slowed HDD growth is more efficient cloud storage. As consumers and corporate entities replace local storage and look to the cloud-where data is stored through networks, either privately or publicly- disk storage vendors may lose another important piece of their market.

See our full analysis of $37.60 Trefis price estimate for EMC .

See our full analysis of $54.93 Trefis price estimate for NetApp .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DELL , EMC , NTAP



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