Seagate Technology PLC (STX): Solid State Drives are Not the End of This Company

Diversifying with mobile drives

Just because I feel that mobile does not rule the entire universe, does not mean it should be ignored. SanDisk Corporation (NASDAQ:SNDK) makes the solid state drives that goes into smart phones and tablets. SanDisk Corporation (NASDAQ:SNDK) is aggressive about solid state drives, and it expects those to be theprimary driver of growth over the coming years.

The recent run up on SanDisk Corporation (NASDAQ:SNDK) has taken its PE to 33, which is understandable given the heat surrounding solid state drives. The company earned its jump by reporting solid earnings at the end of 2012, but 33 seems kind of high. Sandisk offers no dividend, and revenues have seen a decline as of late. Once a bottom sets in the company can start rising on sales of solid state drives. With a multiple as high as SanDisk Corporation (NASDAQ:SNDK)’s I would keep a minimal position.

Conclusion

I am not so quick to write Seagate Technology PLC (NASDAQ:STX) off to its death as some others. I do not think solid state drives are the only future. Hybrid drives are an interesting turn, and I think that will end up being an important part of all the cloud storage. Solid state drives will be needed when extremely fast seek times are needed such as with microservers. That is because the microservers are designed to quickly find information that is in small pieces and requires little processing power to execute.

Sending a streaming movie does not require a super fast drive, because the movie only needs to be delivered at viewing speed or slightly faster. The time it takes to find the movie on a large drive is acceptable given that the trade off would be a smaller, more expensive drive. The hybrid drives are more likely to become the standard for bulk storage, with solid state drives being used strictly for the quickest access. If solid state drives are not subject to the hard physical limits of regular HDDs and they get just as cheap, then they might eventually supplant HDDs. That is a tall order however.