Apr. 9, 2014, 4:52 PM
- IDC estimates global PC shipments fell 4.4% Y/Y (less than a 5.3% forecast) in Q1 to 73.4M, after having declined 5.6% in Q4 and 7.6% in Q3. Gartner thinks shipments only fell 1.7%, and totaled 76.6M.
- IDC chalks up the narrower decline to healthy commercial demand, as buyers purchased Windows 7 systems ahead of Microsoft's (MSFT) termination of Windows XP support. The firm also thinks slowing tablet growth helped out.
- IDC thinks Japanese shipments rose 7%, and U.S. shipments only fell 0.6% thanks to 3.5% desktop growth. Emerging Asia-Pac and Latin American markets, where tablet cannibalization is at an earlier stage, remained weak..
- A mix shift towards developed markets benefits both Microsoft (higher ASPs, less piracy) and Intel (INTC - higher ASPs).
- IDC estimates market leader Lenovo (LNVGY) had a 17.7% share, +220 bps Y/Y. #2 H-P's (HPQ) share rose 150 bps to 17.1%, and #3 Dell's 170 bps to 13.4%. #4 Acer's (ASIYF) share fell 130 bps to 6.8%, and #5 Asus' 20 bps to 5.9%.
- The Q1 numbers suggest IDC's prior full-year forecast for a 6% shipment drop might prove too pessimistic.
- Other companies with strong PC exposure: AMD, NVDA, MU, STX, WDC, HTCH
Apr. 1, 2014, 6:40 PM
- With demand pressured by PC weakness and SSD cannibalization, Gartner forecasts global hard drive shipments will post a 2.9% CAGR from 2013-2018, growing from 552M units to 635.1M.
- High-capacity business-critical drives, beloved by Web/cloud service providers, are expected to fuel much of the industry's growth by delivering a 25.1% CAGR. Western Digital's (NASDAQ:WDC) new Helium drives are aimed in large part at this segment.
- The market for high-margin performance-optimized drives, where Seagate (NASDAQ:STX) has a leading position, is expected to see a -4.9% CAGR. In addition, the segment's ASP is expected to fall 17.1% annually.
- PC drives are a mixed bag: Sales of 3.5" desktop drives are expected to see a -7% CAGR, but 2.5" mobile/notebook drives are seen growing at a 4.2% annual clip. CAGR forecasts for 2.5" and 3.5" consumer electronics drives are respectively at 4.4% and 2.4%.
- Though both Seagate and Western have both launched SSDs, Western has been more aggressive at increasing its flash exposure, as evidenced by the sTec, VeloBit, and Virident deals. Seagate is looking to strengthen its hard drive position through the just-closed Xyratex acquisition. Both firms are pitching 5mm-thin ultra-slim hard drives as an alternative to notebook SSDs.
- Other companies with strong industry exposure: MRVL, LSI, HTCH, OTCPK:TOSBF
Mar. 7, 2014, 5:52 PM
- After falling 3.5% Y/Y in Q3, external disk storage system sales rose 2.4% in Q4, says IDC. The growth came even though sales of the servers that interact with these systems fell an estimated 4.4%.
- Total disk storage sales, which include storage subsystems found within servers, rose 1.3% in Q4 after dropping 5.6% in Q3. IDC attributes the turnaround to "traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies."
- Market leader EMC, which posted strong Q4 numbers to go with light guidance, saw its external disk share rise 220 bps Y/Y to 32.9%, and its total disk share rise 200 bps to 25.8%. The gains largely came at the expense of restructuring IBM, whose shares respectively fell 190 bps and 200 bps to 13% and 14%.
- H-P's (HPQ) external disk share rose 30 bps to 9.6%, and its total disk share 40 bps to 16.3%. NetApp (NTAP), which delivered nearly in-line revenue and soft guidance last month, saw its external share fall 10 bps to 11.5%, and its total share stay flat at 9%. Private Dell's total share fell 140 bps to 9.9%.
- Hard drive/assembly suppliers: STX, WDC, HTCH
Feb. 7, 2014, 5:50 AM
Jan. 27, 2014, 6:07 PM
- In addition to missing FQ2 estimates, Seagate (STX) has guided on its CC for FQ3 revenue of "at least" $3.4B; that compares unfavorably with a consensus of $3.46B.
- Seagate estimates the total addressable market (TAM) for hard drives stood at 142M (same as Western Digital) in the December quarter, up by 2M Q/Q and 6M Y/Y. The company estimates its share was 40%, flat Q/Q but down from 43% a year ago.
- FQ2 gross margin was 28%, flat Q/Q and up 100 bps Y/Y. $1.5B was spent on buybacks, thanks to the Samsung deal.
- Enterprise shipments (higher-margin) +7% to 7.8M, desktops -12% to 19.2M, notebooks -2% to 16.9M, consumer electronics +20% to 6.7M, branded drives (also higher-margin) +3% to 6.2M.
- Western Digital (WDC) is ticking lower in sympathy with Seagate. The shoe was on the other foot last week.
- Seagate's earnings slides
Jan. 22, 2014, 6:22 PM
- Though it beat FQ2 (Dec. quarter) estimates, Western Digital (WDC) has guided on its CC for FQ3 revenue of $3.65B-$3.75B and EPS of $1.80-$1.90, mostly below a consensus of $3.73B and $1.95. The company blames a seasonally weaker hard drive market and lower factory utilization.
- Western is down 2% AH. Archrival Seagate (STX), which reports on Monday, is down 2.1%, as is hard drive/SSD controller supplier Marvell (MRVL).
- Western estimates the total addressable market (TAM) for hard drives was 142M in FQ2; that's slightly above guidance for TAM to be roughly flat with an FQ1 level of 139M. Gaming was an area of strength, no doubt thanks to the Xbox One/PS4 launches.
- FQ2 gross margin was 30.1%, +30 bps Q/Q and +140 bps Y/Y, and slightly better than guidance. FQ3 gross margin is expected to be near the midpoint of Western's 27%-32% model range (implies 29.5%).
- $150M was spent on buybacks, and 54% of revenue came from non-PC applications. ASP rose by $2 Q/Q to $60, thanks to a stronger mix of branded drive and distributor sales.
- FQ2 results, PR, prepared remarks, datasheet
Jan. 22, 2014, 4:17 PM| 1 Comment
Jan. 22, 2014, 12:10 AM
Jan. 21, 2014, 5:35 PM
Jan. 21, 2014, 9:57 AM
- 3D Systems (DDD -3%) has been cut to Neutral by Credit Suisse.
- Seagate (STX +2.1%) has been upgraded to Overweight by Morgan Stanley, and rival Western Digital (WDC +0.5%) has been upgraded to Outperform by BMO. Wesern reports tomorrow, and Seagate on Jan. 27.
- SolarCity (SCTY -3.3%) has been cut to Neutral by JPMorgan. Deutsche started shares at Buy last week.
- SanDisk (SNDK -2.3%) has been cut to Neutral by BofA/Merrill. Q4 results arrive tomorrow.
- NetApp (NTAP +2.2%) has been upgraded to Buy by Lake Street Capital.
- InvenSense (INVN -2.8%) has been cut to Hold by Needham.
- FireEye (FEYE -3.7%) has been cut to Neutral by JPMorgan following a huge run-up in the wake of the Mandiant deal and the company's guidance hike.
- Altera (ALTR +2.8%) has been upgraded to Overweight by JPMorgan ahead of Wednesday's Q4 report.
- Tibco (TIBX -2.4%) has been cut to Neutral by Wedbush. Shares rallied last week on a report suggesting Dan Loeb is set to make an activist push.
- NetSuite (N +1.1%) has been upgraded to Buy by Maxim.
- Violin Memory (VMEM -3.7%) has been cut to Underweight by Barclays.
- Motorola Solutions (MSI +1.8%) has been upgraded to Buy by Citi.
- LG Display (LPL +3.2%) has been upgraded to Buy by BofA/Merrill.
Jan. 14, 2014, 1:54 PM
- Seagate (STX +3.1%) and Western Digital (WDC +3.3%) are both up sharply after leading hard drive suspension assembly supplier Hutchinson (HTCH +13%) reported preliminary Dec. quarter sales that soundly beat consensus estimates, and did so on the back of 13% Q/Q and 12% Y/Y assembly shipment growth.
- Storage hardware vendor Quantum's guidance hike might be helping the hard drive kingpins as well.
- Noble Financial observes Hutchinson's Q/Q shipment growth (attributed to strong demand for 2.5" notebook drives) is "welcome news" given Seagate/Western had guided for roughly flat industry hard drive shipments for the Dec. quarter.
- The firm is reiterating a Buy on Hutchinson, but also thinks the company needs to ship 130M assemblies/quarter (up from a Dec. quarter level of 115.7M) to break even.
- Western reports on Jan. 22, and Seagate on Jan. 27.
Jan. 9, 2014, 5:58 PM
- IDC and Gartner respectively estimate PC shipments fell 5.6% and 6.9% Y/Y in Q4. Those numbers represent improvements from estimated Q3 declines of 7.6% and 8.6%. For the full year, both firms think shipments dropped 10% (to 315M and 316M, respectively).
- Gartner thinks U.S. PC sales (outperformed in Q3) have bottomed, but nonetheless estimates they fell 7.5%, and states "consumer spending during the holidays did not come back to PCs as tablets were one of the hottest holiday items."
- IDC thinks U.S. shipments only fell 1.6%, thanks to healthy enterprise demand. EMEA and much of Asia-Pac remained weak, but Japan delivered positive growth. The U.S. and Japan have higher ASPs and lower piracy rates than many emerging markets.
- Lenovo (LNVGY) added to its market lead in Q4: IDC assigns the company an 18.6% share (+250 bps Y/Y). #2 H-P, which performed well in its October quarter, is given a 16.8% share (-50 bps); both IDC and Gartner think H-P's U.S. sales were weak. #3 Dell, which has been cutting prices to gain share, is given a 12.2% share (+130 bps).
- H-P and Lenovo have each rolled out a slew of new Windows and Android notebooks, tablets, and convertibles at CES. Lenovo's pricing has arguably been more aggressive than H-P's.
- Other PC industry names: MSFT, INTC, AMD, NVDA, MU, STX, WDC.
Dec. 23, 2013, 6:48 PM
- With Xyratex's storage subsystem business both a supplier and a rival to the storage OEMs who account for a large chunk of Seagate's (STX) enterprise hard drive sales, analysts note Seagate's pending acquisition of Xyratex brings both cross-selling opportunities and channel conflict risks.
- BMO suspects Seagate hopes to use Xyratex (presumably via its ClusterStor line) to directly supply Web/cloud providers, but also notes Seagate "will now compete against a set of customers." The Register's Chris Mellor: "Western Digital (WDC) and Toshiba ... should pick up some extra [hard drive] business from OEMs displeased by Seagate competing with its own channel."
- Piper, however, likes how Xyratex's hard drive equipment unit could lower Seagate's hard drive testing times and capex. It also observes Xyratex claims IBM, H-P, NetApp, and Dell as clients, even if it competes with them to an extent.
- Wells Fargo likes the deal, but also thinks Seagate may still need to make some flash storage acquisitions. Western Digital has been more aggressive here, snapping up server flash module vendor Virident and module/SSD supplier sTec.
- Deutsche, meanwhile, expects Teradyne's (TER) hard drive test equipment sales to get a boost as Western Digital and Toshiba stop buying test equipment from Xyratex.
Dec. 23, 2013, 9:25 AM
- Seagate (STX) is acquiring hard drive equipment/storage subsystem maker Xyratex (XRTX) for $13.25/share, or $294M if excluding $80M in cash on hand. The price represents a 27% premium to Xyratex's Friday close. (PR)
- By acquiring Xyratex, which has counted Seagate, Western Digital (WDC), and Toshiba among its clients (the latter two might now now turn to other suppliers), Seagate is vertically integrating in an effort to gain a manufacturing edge. The purchase comes shortly after Western beat Seagate to the punch in shipping helium drives (they're lighter, denser, and more power-efficient than conventional drives), a technology long promoted by Xyratex.
- The deal also increases Seagate's enterprise storage exposure. As SA Pro contributor Kingsley Park Capital has noted, Xyratex, historically focused on relatively low-end solutions, recently launched ClusterStor, a solution aimed at the growing, higher-margin HPC storage market.
- Seagate expects the purchase to contribute $500M-$600M to FY15 (ends June '15) revenue, and to be neutral to FY15 EPS. The deal is expected to close by mid-2014. Activist investor Baker Street Capital, which has a large stake in Xyratex, backs the deal.
Dec. 20, 2013, 11:44 AM
- Brean's Ananda Baruah has raised his Seagate (STX +4.1%) PT to $70 from $55, and his Western Digital (WDC +0.9%) PT to $125 from $85, while reiterating Buys for both names. The PT hikes come shortly after the hard drive giants respectively received upgrades to Overweight and Buy from JPMorgan and Citi.
- With industry consolidation keeping pricing healthy, Baruah thinks Seagate/Western can deliver 100-200 bps of gross margin improvement over the next few years, and perhaps 400-500 of improvement within 5-7 years.
- That, in turn, leads him to forecast Seagate and Western willrespectively deliver $7+ and $8.64 in calendar 2015 EPS. He add cost savings obtained from integrating Hitachi's hard drive unit could boost Western's EPS by another ~$1.70. For reference, Seagate's current FY15 (ends June '15) EPS consensus is at $5.96, and Western's is at $8.59.
- Seagate has made new 52-week highs, and Western is close to its 52-week high of $84.70.
Dec. 13, 2013, 9:14 AM
- Citi's Joo Yoo has upgraded Seagate (STX -0.3%) and Western Digital (WDC +1.3%) to Buy, while respectively raising his PTs to $62 and $100.
- Echoing recent Intel upgrades, Yoo expects Seagate and Western improving/stabilizing PC demand. He also sees the hard drive giants to getting a boost from sales to cloud infrastructure services firms; Western is targeting these companies (and others) with its new helium drives.
- Yoo downgraded Seagate and Western to Sell in Oct. '12, and upgraded them to Neutral in July. Shares have had a pretty good run over the last 14 months.
- STX +1.6% premarket.
WDC vs. ETF Alternatives
Western Digital Corp is a developer, manufacturer & provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its product include; HDDs and SSDs.
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