- Pac Crest's Monika Garg, who upgraded Seagate (STX +2.4%) to Outperform this morning, argues declining PC hard drive sales are offset by strong sales of enterprise drives, which are believed to carry 70%-80% higher margins.
- Garg sees rising hard drive sales to cloud service providers aiding Seagate, which has historically had a disproportionate share of enterprise sales, and notes the company's top 9 cloud customers account for 35% of its enterprise revenue. She also notes flash memory is still more than 10x as expensive as disk storage on a $/GB basis.
- Two issues Garg may be overlooking: 1) Many Web/cloud firms are opting for cheap, high-density drives rather than the high-margin/ASP drives that go into traditional enterprise storage systems. 2) A lot of these firms are embracing flash in spite of its higher cost.
- Seagate sold 8.2M drives into the "Enterprise Storage" market in the June quarter, down from a record 8.5M a year earlier. "Client Compute" drive sales fell to 34.7M from 46.3M, and "Client Non-Compute" sales to 10.9M from 11.2M.
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Pac Crest's Seagate upgrade: cloud sales, margins in focus
Oct 2 2013, 14:40 ET