Shebly Seyrafi, an analyst at Caris & Co., this morning raised his ratings on Seagate (NASDAQ:STX), Western Digital (NASDAQ:WDC) and Bell Microproducts (BELM) to Above Average from Average, citing a strengthening in demand for hard-disk drives over the last two weeks. Both Seagate and Western make drives; Bell is a distributor of storage products:
Our mid-August channel checks suggested that pricing had become aggressive in both desktop and mobile HDDs and that channel inventory levels had risen to around 6 weeks from 3-4 weeks. However, over the past month (especially over the last two weeks) demand has exceeded the expectations that existed just a month before. Whereas our sources in the channel had anticipated around 10% HDD unit growth (in consumption) a month ago, we are now hearing that 15% growth this quarter is achievable. Overall units may grow 10% sequentially, but the strong consumption growth could lead to lower channel inventory levels. Because of the strong demand, HDD channel inventory has been reduced to around 3-4 weeks again.
Seyrafi says European demand is especially strong.
He also said that it would be a mistake to extraplolate recent weakness at Hitachi to the broader drive market. Hitachi is particularly strong in mobile drives; the company has said demand in that market has been stiff and demand below expectations. But Seyrafi notes that the mobile market accounts for about 50% of Hitachi’s revenues, versus just 10% for Seagate and Western Digital.