3 Companies to Consider in the Data Storage Devices Industry
Awais is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With the increasing penetration of technology in the general public, the demand for data storage, data mining and networking has never been higher. The demand for such products and services is global as our world becomes increasingly interconnected. The technological breakthroughs in devices such as smartphones, tablets, gaming devices, etc. have all warranted the need for greater storage and connectivity.
SanDisk (NASDAQ: SNDK), Brocade Communications Systems (NASDAQ: BRCD) and Teradata (NYSE: TDC) are three technology companies that provide services and products related to data storage, data mining and networking. Let us analyze which one of them provides the best investment opportunity.
SanDisk’s expanding markets
SanDisk develops and manufactures flash storage card products that are used in different consumer electronic products. Its products include removable cards, embedded products, universal serial bus flash drives and solid state drives.
SanDisk operates in a growing market as the worldwide consumer storage needs are set to grow from 329 exabytes in 2011 to 4.1 zettabytes in 2016. It is also forecasted that the average storage per household will rocket to a figure of 3.3 terabytes in 2016 from a figure of 464 gigabytes in 2011. SanDisk is expecting its revenue from removable & other products, mainly demanded by individuals, to rise to $7.6 billion in 2016 from a figure of $7.1 billion in 2012.
Small businesses require the use of network-attached storage, or NAS, which involves various bundled hard drives with related software and services. The NAS market is expected to grow at an annual rate of 51.1% from 2011 to 2015. This is the reason why SanDisk expects its revenues from the enterprise solid state drives to grow to a solid $7.4 billion in 2016 from a figure of $2.8 billion in 2012. SanDisk global leadership in flash memory storage solutions has allowed it to report gross margins as high as 41% in recent quarters. The company’s revenues are also increasing from a year-on-year angle.
Brocade: Banking on its innovative solutions
Brocade engages in the supply of storage area networking, or SAN, and ethernet networking solutions, which are based on the internet protocol. The company operates through its storage area networking products segment, IP networking products segment and global services segment. The company has shown impressive growth in its EPS figures whereas, over the years, its net income has also increased. The company’s balance sheet portrays a solid financial position of the company with reasonable debt undertakings.
The company is positioned for growth because its solutions are aligned with the prevailing technology trends such as virtualization, cloud, mobility and SAN. The company has the leading 16 Gbps SAN products and comprehensive campus LAN portfolio under its belt, which provide for the product excellence at the company. The company is also working towards growing its presence in the ethernet market and continuing its leadership in SAN products. With such a balanced approach, the company will be able to continue its impressive growth in the future.
Teradata’s growth strategy
Teradata is a leading provider of analytic data solutions around the globe. The company provides a one-stop solution for the data warehousing needs of businesses by providing the relevant software, hardware and related support services. The solutions Teradata provides help businesses integrate their customer, financial, operational data into a single integrated data warehouse.
With the advent of new analytics and database technologies in the market, investors should not shy away from this company as its products are all high-end with high switching costs. This is helping the company retain its customers at large and also keeping its competitors at bay.
A quick look into the balance sheet of the company would reveal that it has plenty of cash on hand. Teradata will use this capital to move into big data centers and the cloud. The company is also tying its future growth prospects with its subsidiary, Aprimo. The company is an integrated marketing management solution provider. Aprimo is developing systems that will help businesses gather strategic insights through the provision of seamless customer engagement along with a multi-channel campaign management. Teradata, therefore, has some solid plans for the future.
Increasing penetration of technology in the general public and business operations is driving demand for ancillary businesses, such as those involved in the data storage devices industry. SanDisk, Brocade and Teradata are three companies that are positioned for growth in this particular industry.
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Awais Iqbal has a long position in Teradata. The Motley Fool recommends Teradata. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!