The biggest news hitting the storage market is Microsoft’s release of
Vista. Currently the consumers are looking for more and more data space for
music, entertainment, and pictures, which has really jump started the external
market with end-users. Prior to Vista, system requirements did not have to change
to put music and pictures on computers by utilizing an external option. With
Vista that will change. To run Vista one must have at minimum a 40GB drive capacity
with 15GB of free space. There is a large base of systems with 20/40GB hard
drives still in the market that will have to be replaced or upgraded with larger
hard drives in order to take advantage of Vista and its features.
Microsoft believes that people will most likely buy new systems rather than
upgrade their existing system. Horizon believes this is true for the consumer.
However, we expect corporate America to pursue the cheaper solution of upgrading
their existing systems or forgo Vista altogether. This in turn shall make the
drive market quite interesting over the next several months.
Desktop Market/IDE
Activity in the desk market as a whole has been relatively inactive over the
past few weeks. Between manufacturers scheduling price drops and year -end excess
hitting the channel, we have seen a significant decrease in pricing in the market.
400GB and 500GB sizes in both PATA and SATA have experienced the most severe
decrease in price, dropping up to 10%. We are hearing a rumor that there will
be a price drop on Western Digital 250GB product that may be occurring next
week. This is significant with the larger capacities due to the continued healthy
demand from the external drive manufacturers, driven by the release of Microsoft
Vista .
The only allocation issues we are seeing is for the 320GB capacities. This is
driven by the demand from the manufacturers of external drives with very limited
availabilities in either PATA or SATA. As a result, customers have been turning
to factory recertified products to fill the gap.
Mobile Market
The 1.8" market continues to drive the mobile market with Apples’ IPOD continuing to account for the bulk of the demand. We are primarily seeing a demand for Toshiba first and second generation drives in 20GB and 30GB capacities. Pricing has increased approximately 5% on this product with spotty availabilities and we expect to see continued upward pricing pressure.
The 2.5" market is showing steep decline in pricing for low capacity drives. Contributing to the downward pressure is the volume of excess inventory in the 40/60/80GB capacities released into the market at the end of the year. Pricing has almost reached parity between the three capacities. Consumers are only buying 40GB and 60GB if their system or application will not allow them to upgrade to a larger capacity drive. However, emerging markets are still using the 40/60GB capacity because price still takes precedence over capacity.
Enterprise Market
We are seeing the transition to SATA from SCSI beginning to take form. This
trend will accelerate, especially with terabyte drives by Hitachi and Seagate
hitting the street. Currently consumers need 3 SCSI drives to get as much space
as one SATA/PATA terabyte drive. However, the SCSI market will continue to see
demand from the large install base of SCSI based enterprise systems. A typical
example of a predicament: OEM’s might find themselves unable to upgrade
to a higher capacity drive because of the narrow connecters used in past SCSI
drives. This will require them to utilize the open market to fulfill demand.
