According to the latest report by Longbow Research, the hard disk drive (HDD) market is not as weak as many had expected so far in Q2. Longbow’s recent price checks indicate that the HDD comeback is largely due to strength in consumer PC numbers.
Longbow analyst Joe Wittine notes that Q2 price checks indicate that HDD pricing, particularly for 2.5” notebook PCs, is solid, and the HDD mix has been favorably skewed toward higher-capacity drives. “While we appreciate recent 2Q PC shipment data from Taiwan have been soft,” Longbow writes,” for the HDD stocks the herd sentiment appears to be swinging too negative on PCs, and WDC’s CY2Q TAM guidance of 120M (vs. 125M PQ) does appear achievable, while STX’s 125M is at risk.”
According to the report, 2.5”/Notebook PC HDD prices are down 1.1 percent quarter-over-quarter (Q/Q) so far in Q2, while 3.5”/Desktop HDD prices are down 3.2 percent Q/Q. HDD attach rates are coming in at 45 percent in Q2 versus 25-30 percent in previous checks. Finally, the number of 750 Gb and 1TB HDD’s that are shipping with notebook PCs is on the rise in Q2 compared to the number of 50Gb drives.
Longbow rates Western Digital Corp WDC a Buy, and calls the stock “the best way to play the secular build-out of the Cloud’s infrastructure.”
Longbow rates Seagate Technology Public Limited Co STX at Neutral. Analysts call the outlook for Seagate’s systems business “murky” and question the company’s ability to meet it’s guidance for the second half of the year.
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