Tuesday, October 19, 2010, 09:30 pm PT (12:30 am ET)
Apple's iPad shaking up hard drive industry - reportAs Apple's success with the iPad continues to grow, hard drive makers warn that sales of Apple's tablet will continue eating away at sales of hard drive-equipped PCs.
Western Digital Chief Executive John Coyne told analysts Tuesday during an earnings call that tablet computers such as Apple's iPad are slowing the hard drive business, especially on the low-end. The iPad could cause as much as a 10 to 20 percent reduction in shipments of low-end laptops and netbooks over the next few quarters, Reuters noted Coyne as saying.
"What I would say to investors is to look at the long-term demand for storage, the fact is the most appropriate solution for mass volume storage is hard drives and to look at the long-term progress the industry has made over the last 10 years," said Coyne in an effort to reassure investors.
Both Western Digital and rival hard drive manufacturer Seagate watched their stock price steadily drop during the early part of this year, although rumors of buyouts have helped the stocks rally in recent weeks. According to Reuters, some analysts view Western Digital as a "good candidate for a leveraged buyout" because of its low share price and strong cash flow. Western Digital's stock price has fallen 35 percent since January.
Several private equity firms have reportedly expressed interest in purchasing Seagate and taking it private, Reuters reports. The company has been down that road before; it went private in 2000, re-entering the public market in 2002. Seagate will report its quarterly earnings on Wednesday.
Meanwhile, as hard drive makers suffer, NAND flash makers may benefit from the upheaval. Japanese newspaper Nikkei projected Wednesday that Toshiba will beat its first-half of the year operating profit forecast by more than 43 percent due to strong sales of flash memory chips, according to Reuters. In a filing with the U.S. Federal Communications Commission, Apple listed Toshiba as the provider of the iPad's NAND flash storage, although teardown specialists at iFixit found a Samsung flash chip inside the iPad unit they disassembled.
Apple's rapid consumption of flash memory has caused several worldwide shortages as the company has moved toward NAND storage solutions. The Cupertino, Calif., company currently uses NAND flash in a wide variety of its products, including the new $99 Apple TV.
Apple revealed Monday that it had sold a record 4.19 million iPads in the September quarter, outselling its Mac computer line after just two quarters of availability. Wall Street analysts had expected higher sales of the iPad, but supply had remained constrained throughout the quarter. According to iSuppli, NAND flash is one of the components limiting production of the tablet device.
Another blow to hard drive manufacturers could come in the form of an updated MacBook Air. Sources say the next-generation MacBook Air, which is expected to be unveiled at Wednesday's "Back to the Mac" event, could do away with the conventional hard-disk drive (HDD) and high-end solid-state drive (SSD) in favor of a smaller "SSD Card" resembling a stick of RAM.
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