Who will dominate cloud-based services?
Apple favors SSDs and so does Facebook Inc (NASDAQ:FB). This news has alarmed shareholders of Seagate Technology PLC (NASDAQ:STX) and Western Digital Corp. (NASDAQ:WDC) because people are wondering if other large companies like Google Inc (NASDAQ:GOOG), Netflix, Inc. (NASDAQ:NFLX), or Amazon.com, Inc. (NASDAQ:AMZN) will follow suit. Facebook and Apple are basically propping up Fusion-io at this point, because both companies are responsible for almost 50% of the revenue for Fusion-io.
In my opinion, investors should not worry about companies switching to SSDs any time in the near future. Facebook and high-end companies like Apple have the extra money to spend on SSDs. The actions of these two companies do not necessarily indicate that other companies will follow suit. The economy is still on shaky ground, so I think that most companies will be slow to adopt SSDs in the foreseeable future.
If you are thinking about investing in Fusion-io, you might want to consider that its stock has dropped 25% recently, due to delayed orders from both Facebook and Apple. Hewlett-Packard Company (NYSE:HPQ) is another large client for Fusion-io and the company has been struggling recently. Therefore, I think that both Seagate and Western digital are in much more solid positions than Fusion-io.
Seagate and Western Digital are innovating
Both Seagate and Western Digital are working on technology to compete with SSDs. The two companies are developing hybrid drives that use both SSD and HDD technology in the same drive, which will give it the benefits of SSDs and the affordability of HDDs. Users can install the OS on the SSD and use the HDD portion for storage needs. Both companies also provide supplementary external drives that are used wirelessly with mobile devices to increase storage capacity.
Even more interesting, Western Digital is developing a new technology that involves helium-based drives. Helium will increase the lifespan of the hard drives, consume less energy, and will have much more capacity. It is expected that demand for these new devices will be 100 million drives per year by 2018.
All in all
In the short term, business and cloud services will help both Seagate and Western Digital stay stable and grow. The companies are already working to develop new helium-based drives that will most likely become standard in the industry. Investors believe that the outlook is good for Seagate and Western Digital because shares are up nearly 25% for both companies from last year. If you really understand the market, you will see that both of these companies are great investments.
The article Why You Should Purchase Seagate and Western Digital originally appeared on Fool.com and is written by Nauman Aly.
Nauman is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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