Shining Stars in the Data Storage Industry
usman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Due to the high penetration of mobile devices, consumers have started to create large amounts of digital content. This has led to the growing demand for data storage devices. Consequently, sales of hard disk drives and solid-storage media, including SSD, 15K-RPM and 10K-RPM performance drives, are showing robust growth. Worldwide spending on cloud storage solutions is expected to grow from $91 billion in 2011 to $207 billion in 2016. It is surprising to note that by 2016, 36% of all consumer digital content will be stored on the cloud. The worldwide storage capacity demand is also forecast to increase from 329 exabytes in 2011 to 4.1 zettabytes in 2016. Consequently, the average household's storage capacity will increase radically from 464 GB in 2011 to 3.3 terabytes in 2016.
Industry players are set to exploit the coming changes in the market. Today, my analysis is based on the leader of the big data industry, EMC (NYSE: EMC). The analysis will focus on the company’s innovations and their impact on the company. The analysis will also include a comparison of EMC with its rivals.
Launch of ViPR
EMC has recently launched ViPR, which is the world’s first software-defined platform. The device has the ability to manage data storage infrastructure. It enables enterprises to build Web Scale data storage infrastructure without hiring specialists. ViPR is integrated with Brocade’s Gen 5 Fiber Channel storage area network, which will help both companies to service approximately 50,000 joint customers. ViPR is expected to generate long-term revenue as it gives EMC a competitive edge, plus the first mover advantage.
New silver tail solution
EMC has introduced a web-threat detection solution that will allow enterprises to provide web security for online and mobile applications in real time. Organizations are increasing their spending on web-threat detection solutions to avoid decreases in revenue caused by fraud or other disrupting uses of their websites. According to International Data Corporation, the emerging security market is anticipated to grow to $905 million by 2014 from $198 million in 2009. This growth will help EMC boost revenue through the silver tail solution.
Collaboration of EMC and VMware
EMC, by making a joint venture with VMware, will form a new service called Pivotal, which will provide a platform for cloud computing that will help users interpret their unstructured data. EMC holds 62% of the control and has invested $400 million in Pivotal. By 2017, Pivotal is expected to generate $1 billion in revenue.
Competitors thrashing with innovation
Seagate (NASDAQ: STX) is one of the world's dominant hard drive manufacturers and is a top dividend-paying stock on the Nasdaq 100 index. Its profits from laptop data storage devices decreased in the last quarter. The company launched a 5mm thick hard drive on June 2, 2013. Previously, it manufactured 9mm thick hard drives, but with the growing demand of the hybrid laptop/tablet, the company realized the changing need of its customers. Currently, its market share in hybrid laptops and tablets is only 5%, but it is expected to reach 10.5% by the end of 2015.
On the other hand, Western Digital (NASDAQ: WDC) launched the fastest and most advanced multi-level drives in the 12 Gb/s SAS SSD family. The devices are capable of handling applications with high demands such as high-frequency trading, cloud computing, big data, and online gaming. The devices will reduce the input/output time by 300%. Through this launch, the company’s global market share of SSD devices will reach 16% by 2014, up from its current market share of 8%.
The company’s revenue from the PC hard disk segment has declined steadily. After this decline, the company decided to divest its Viviti segment. The company expects to save $400 million on this segment by the end of 2015.
NetApp (NASDAQ: NTAP) has recently released the 8.2 version of its operating system, ONTAP. The system has been ranked No. 1 by IDC. The features added in the system are expected to increase the company's market share. Historically, its share of the storage software market has been close to 8%, which increased to 8.7% in 2012 due to the rapid increase in the popularity of ONTAP.
The company’s revenue stagnated last year due to reduced spending by the U.S. military and other agencies, which are its major customers.
Currently, the data storage industry provides the best opportunity for both long-term and short-term investors. Based on the above analysis, I would recommend buying all the stocks except NetApp, due to its weaker performance in this period. EMC, Seagate, and Western Digital have performed brilliantly in their recent quarters, and due to their latest launches, the revenue and market share for these companies are expected to grow further. EMC and Seagate, however, are the best buys of the lot.
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usman iftikhar has no position in any stocks mentioned. The Motley Fool owns shares of EMC and Western Digital.. 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!