Brean Murray Comments On Industry Consolidations (STX, WDC)

While the impact of the Japanese tragedy remains uncertain, “our work suggests some haircut to PC demand, with the disk drive impact less clear; our work suggests PC demand has begun slowing a bit in Asia (as well as in Japan) as some are taking a ‘wait and see' approach to the potential repercussions from the Japanese tragedy; obviously in Japan itself there is less business being conducted,” Brean Murray reports. “Our best estimate right now is for Mar Q PC shipments of ~85M or down 10% Q/Q (and flat Y/Y) vs. our last ‘official' estimate of 87.2M PC's. On drives, our work hasn't yet shown any change from our previous ~157M Mar Q unit expectation; but we believe the potential to see this move lower commensurate with PC demand exists (a 3% haircut to drives would place units in the low‐150M unit range for the Mar Q. “If Mar Q drive demand ends up being in the low‐150M units range, we believe CY11 units could end up in the 675M – 680M range, or 3%‐4% Y/Y unit growth (vs. our current 685M forecast, or 5% growth).” Brean Murray also said that Western Digital Corp. WDC will benefit substantively from acquiring Hitachi, adding that “we expect Seagate Technology PLC STX to gain meaningful PC share as a result.” Western Digital closed Friday at $33.89; Seagate closed at $13.19.