Market-Sentiment Swings Too Far Towards Flash (AAPL, SNDK, STX)

Includes: AAPL, STX, WDC
by: The Stalwart

Techdirt asked Can Flash Crash The Hard Drive Business? Certainly Mr. Market thinks so, writes The Stalwart. Since the announcement that Apple's newest iPod would use Flash memory, and Samsung's Kruschev-esque announcement that Flash memory would bury HD, shares in hard drive market-leader Seagate (NYSE: STX) have plummeted.

They're down to around $15/share from almost $19 in August. Meanwhile Seagate has pre-announced solid earnings, and a host of new consumer-electronics products from DVRs to radios are set to increase demand for HD.

To give you a sense of how hard Wall St. has fallen in love with flash-memory, look at the price spike in shares of Sandisk (NASD: SNDK) whose shares have shot up since the Nano announcement. Just one problem...Sandisk only makes removable flash-memory cards that have nothing whatsoever to do with the iPod.

The iPod halo-effect has become larger than anyone could imagine.

In our view the sentiment has swung too far. Flash hasn't achieved anywhere near cost-parity to HD on a per-gigabyte basis, and while it may gain ground on the low end, consumer storage demand continues to spiral upward where hard drives have no competition. In our view the two forms are likely to co-exist for some time.

Seagate is the leader in this space, and looks interesting at these prices. For more education, here's an interview with Seagate's CEO, as he attempts to make the case for hard drives once again.

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