STX says this purchase will be accretive to EPS (non-GAAP) this FY. Usually, it takes more than a year (maybe 2), not less than a year. That is a sure sign some stocks in the storage sector have become undervalued. WDC may be on the hunt.
Whether this is a dumb move or not I can't tell you.
But if you think building a storage behemoth is a coffin-cornered business, you're way wrong. You and you're alternate ego u_r got a one track mind. Both STX & WDC are just as heavily investing in the flash-side. Both companies are simply expanding their storage portfolios up and down the storage supply chain. They are pursuing and adding resources where there is value to add (and margin to add). There is no margin to add and very profits to gain by chasing the lowest end of the storage market. Let the SSD guys kill themselves, and eventually broad-based storage companies will remain standing.
If I remember correctly, HILL was a primary competitor to XTRX. Don't know if they still are, but it seems pretty clear the direction STX is taking for diversification.
Consolidation is on-going in the storage market. The component side got consolidated. The manufacturers got consolidated. Now, the after-markets are consolidating. All the storage sectors.
Don't think it has anything to do with Massengil. He's been on the BOD since stepping down from mgmt. He was a good exec. He sort of had a black star from the option pricing scandal (or whatever it was) many years ago.
"STX has higher dividend rate and their management is reputed to be more “shareholder friendly” whatever that means."
Do not underestimate this factor. With interest rates near zero and the P/E factor equal, the only tangible difference is dividend and buyback pressure. Doesn't matter if WDC has a much better balance sheet and more cash - they do not use it to the shareholders advantage in the sense of giving something tangible back.
However, in the 1 - 2 yr term, the MOFCOM factor may trump all else - and that favors WDC. That decision will have a greater impact upon the WDC P/E vs STX.
And they said this:
"As a result of our business outlook, capital allocation and expense control, we are targeting at least 10% non-GAAP EPS growth in FY16."
Well, the easiest way to make that happen in a flat revenue environment is to reduce the share count used in EPS. They are halfway there.
The guidance was almost exactly flat q-to-q to slightly better. We know WDC is generally conservative. Let's hope STX does not foul the pool next.
But this is what Milligan said about MOFCOM:
"I would like to comment on the status of our discussions with China’s Ministry of Commerce. Since our last earnings call, we believe we have made meaningful progress. We have met with MOFCOM several times to discuss their review process and a potential timetable for them to complete their work. We have submitted a comprehensive report on the current market, which we believe shows that the storage ecosystem has evolved significantly in the last 3 years and that lifting the hold separate restriction will enhance competition, increase innovation and benefit customers. We have also met with several other stakeholders in China and shared our views on the benefits of lifting the hold separate. Based on our conversations with MOFCOM, we believe that they are working steadily on several fronts and we are hopeful that they can conclude their evaluation of our application to lift the hold separate in the near future."
This statement is considerably more positive than the frustrated diatribe unleashed last qtr. Sounds like he is making nice with the Chinese.
Even though they missed the TAM by ~4Mill drives, they must have known what was up (or down) to have gotten EPS & Rev so close. Their GM stayed around 29%, so I wonder what hit STX?
I guess they'll explain the $100Mill "other" charge in the call.
I would not expect any real improvement in the Sept. qtr vs the June qtr.
For many years, I've stated that flash is just another form of storage, that both SSD & HDD will complement each other in the storage universe. It's not flash or magnetic, SSD or HDD. It's both and all. The flashaphiles that come on here could care less about SSD - they're simply trying to bash the drive stocks. I think the term I used is canard: the SSD is replacing HDD chant was/is just a canard.
As for this new INTC/MU memory: if it becomes mainstream it will also complement the storage universe.
If you ask me which component of the storage universe it "threatens" first, it will be whichever component might have a higher value replacement. And that will not be the component that has the lowest cost. Why would you attempt to supplant the lowest cost & lowest margin component (HDD) with a new high $ component? There are more $s available in supplanting higher $ flash components - maybe SLC flash devices.
Just my opinion.
The first obvious answer is: he was wrong and biased. If you accept that, then that is the easy answer.
I suspect the answer is a little more complicated. And we all know Wall Street can't stand anything complicated, especially if it requires looking out about 2 years (the time frame referenced by the STX exec). That's like ... forever for Wall Street. They can play it up and down 6 times before that day.
But there is one simple stat: compare the rate of data growth vs the rate of storage density growth. It is true that we are generating data to be stored far faster than we are increasing the capacity of the storage devices that store that data. The point at which it becomes a critical issue is only a matter of time.
Unless we start using many more devices.
Kind of hard to extrapolate what INTC said about PCs and servers and cloud over to the storage world. Especially given STXs weak pre-announcement. Maybe the last half of the year will be better than the first half. Makes me think STX may have had something "special" going on last qtr that will make them weaker than WDC - relatively speaking. Like they had some misses on cloud/enterprise, or what they call "lumpiness." Their GM seems a little low.
Seems pretty clear nobody has a clue what MOFCOM thinks or why. But it is clear they are causing significant distortion in the market segment - not allowing WDC (or STX) to fully adjust to the changing dynamics.
You're probably about right. WDC didn't preannounce this qtr because they were already low man. They are probably within 10% of their estimates. But don't expect much improvement next qtr.
If this is the new norm in demand (let's say somewhere between 110Mill and 130Mill), then the time has come for another round of consolidation. This time, the companies themselves must get leaner and MOFCOM is the primary impediment to that. WDC has worked the headcount down about 25K since the HGST semi-merger. Probably needs to get down another 10-15K if demand stays in this range.
A couple opinions here:
There probably will be well placed Chinese that will learn in advance and trade the resolution. If they are stupid, they will make a big trade. If smart, they will keep it low key. I don't think that plays any part in the shenanigans going on lately.
The other point to make is MOFCOM has overplayed their hand. I'm sure when they setup the hold separate requirements for WDC (& STX) it was to foster greater competition in those segments important to the Chinese. And circa 2011, after devastating floods and price/availability shocks in the drive market primarily borne by consumers, that would be the mobile market. In 2015, the mobile market is bearing the brunt of the consumer shift away from PC notebooks. And the continued encroachment of smaller capacity SSDs at the entry price point. Let's face it: when you get down to just one of everything that goes into a drive, the minimum price for that drive to be profitably sold is cast (regardless of capacity). Right now, that's the 500GB HDD, and about $40. If OEMs want a less expensive alternative (regardless of capacity), the HDD makers might just walk away. At least I hope they do. The SSD guys are making the same mistakes the HDD guys made years ago: it does no good to slash prices to gain market share.
But more importantly for right now, the mobile market segment simply does not have the volumes required to support 5 HDD companies (plus all those SSD guys). There must be consolidation of the corporate structures to match the shrinkage of the addressable markets. I think this is the primary point both STX & WDC have been dancing around. MOFCOM is hurting the business much more significantly in 2015 than 2012.
You stated: "...with 128Gb SSD cheaper and 256Gb SSD only moderately more expensive than a typical 500Gb HDD"
Still not true.
Now, you continue to focus on what's happening in the lowest margin portion of the drive business - which may account for maybe 10% of sales. Even less of profits - these drives sale well below the ASP. The real problem is not SSD displacing HDDs in notebooks (or DTs). The real problem is just low overall demand - regardless of whatever the configuration is. Why are SSD prices crashing on the low end? Obviously, not from too much demand. The SSD guys are chasing each other down the gross margin rathole - overproducing. Great for consumers - bad for producers. The overall mobile end market demand is simply not there to have 5 HDD producers and who knows how many SSD producers chasing the same game. The HDD companies have seen this picture - that's why they cut production. Once a few more SSD makers go BK, maybe they will learn.
BTW: both STX & WDC are making substantial headway in the flash/SSD segments that have profitable margins.
You again. All the shorts coming home. Wouldn't expect you to actually read what MU provided (& what was said) relative to the PC market. Yes, it was weaker than they expected - resulting in near flat sales volume. Their real problem was ASPs dropping 10% on DRAM. DRAM makers over-produced.
Compare that to both STX (& more so WDC) already predicted lower TAM, driven by lower PC demand. So HDD volumes may come in around expectations. And each has curbed production. Most likely, ASPs will be up.
MUs hit also came on projections for next qtr (which they are in). Their NAND ASPs are flat on lower sales volume. DRAM volume is up, with ASPs still down. Not good for their revenues, relatively better PC sales outlook. Check page 17 of their slides.
Of course, that won't stop people from jumping first and asking questions later.
Going a little further down the message list, I was sad to see this thread.
Some around here would say I talk too much. But in these circumstances, I'm at a loss for words that don't sound trite. You have been one of the most steadfast INVESTORS in STX, for many years. There are a lot of people that could learn much from your example.
I wish you continued strength for your battle ahead. Thank you for your contributions all these years, and may you and your family find peace.
You're still here trying to spread BS & lies about SSD vs HDD?
Go to newegg, search for 128GB SSD, sort lowest cost first: the cheapest 2.5" 128GB NON-refurbished SSD is Sandisk @ $54.99. Do the same for 500GB 2.5" HDD, and you get WDC for $44.95. At OEM prices, the differential will be about the same. And if you want to compare 256GB SSD, the differential is greater.
Now, will SSDs continue to supplant HDDs in notebooks? Yes. But in the hyper-competitive world of consumer notebooks, if an OEM can deliver a system with a lower price point by $5, they will do it. Because the system only has a 1-yr warranty (drive durability does not matter). And from a performance standpoint, consumers will hardly ever see a difference between SSD & HDD: pulling stuff off the internet & cloud (where most consumers live) is oblivious to the drive.
But as we are seeing, the relevance of notebooks to the overall storage demand market is becoming less important every day.
So why don't you and your buddy kleemc read the recent ComputerWorld article titled:
"The rise of SSDs over hard drives, debunked"
Was travelling around US & abroad. In the US, there are "Help Wanted" signs everywhere. Granted, they might not be high paid sit on your butt all day jobs, but a lot of places need workers. Still need to get Europe going.
As for back here in HDD land, seems like old (bad) times. Upgrades, downgrades, this report, that proprietary report (aren't they all???)... yada, yada, yada. Sure seems strange that for 2.5 years, everything is quiet (from the shills). Now - a bunch of static. For an industry down to 2 investable players, does this sector deserve this much attention? Especially one everybody has been predicting the death of for over a decade?
Yet, the world creates more data than ever before. Think about all that: if this is a dead sector, why all the attention? And why would JPM or GS give away free investment advice? Naaah - like previous stock price cycles - these guys are just setting up positions.
Yeah, notebooks & consumer systems ain't doing real hot, but desktop and servers are real good. DTs are doing better than projected. And on the server side - it's kind of interesting. Some 2003 servers are being upgraded. And some are being replaced by NAS, with a side order of cloud. Either way, still use plenty of HDDs.
As for market reports - there hasn't been a significant change in inventory or prices for months and months - same as last qtr and qtr before, and before..... Production is being cut rather than prices.
And as for somebody out there posting something about buying Sandisk? Was that guy living in CO?