Storage Pricing, Capacity Stabilize
IT managers and consumers alike will be able to choose from two tiers of products this holiday season: models that comprise 40GB and 80GB per platter, according to analyst Dave Reinsel of IDC. High-end models at Dell and other suppliers will probably feature the 80GB drives, he said. However, its likely that the industry wont shift to the 80GB models until next year, when 80GB pricing drops enough to force 40GB-per-platter drives out of the market, Maxtors Tufano said. "While more and more people will ramp on 80GB, the impact on pricing will not be that dramatic," Tufano said. Maxtor raised prices on most of its products in July in anticipation of the holiday uptick and to balance out demand, he said.
Typically, PC OEMs begin purchasing components in late August, building out their inventories in anticipation of the holiday selling season, which begins in late November. So far, drive supply has remained "tight, but stable," Reinsel said."It would seem clear that the commercial business is beginning to pick up in corporate Western Europe, and corporate America is also beginning to pick up," said Matt Massengill, chairman and chief executive of Western Digital Corp., of Irvine, Calif., in a presentation at the Prudential Equity Group Storage Tour. "Theres no question well always see a seasonal impact, but its clear to me were seeing some pretty good end-user demand." Average selling prices of the drives should flatten out, smoothing out a steady decline in ASPs over the next four to seven quarters, Massengill said. At the same time, the drive industry has resisted dumping drives into the "gray market", the industrys traditional addiction. Massengill said that a competitor had walked away from doing business with Dell Computer Corp., after Dell had reportedly pressured the supplier to lower prices to unsatisfactory levels. Massengill said that he also did not anticipate any shortages of the heads and media components needed to assemble the companys own disk drives, thanks to the fact that the company bought a key heads supplier, Read-Rite Corp., in July. WD is on track to produce 30 million heads internally by June 2004, the same amount it previously purchased from outside suppliers from Read-Rite. The internal production will not affect the prices of WDs drives but will boost its gross margins by a few points, he said. Next page: Notebook storage race heats up.
Typically, PC OEMs begin purchasing components in late August, building out their inventories in anticipation of the holiday selling season, which begins in late November. So far, drive supply has remained "tight, but stable," Reinsel said.