Western Digital ($WDC) and Seagate ($STC) offer hard disk drive (HDD), solid state drive (SSD), and other flash based data storage devices in a variety of internal and external form factors. Internal hard drives may be used in laptops or desktops and external hard drives are often used for backup purposes, or for transferring a quantity of data that would be impractical to transfer over the internet. Both Western Digital and Seagate have played a meaningful role in providing effective computer data storage hardware to fuel the rapid technological progress that has transpired over the twenty-first century.
Western Digital and Seagate have effectively established an oligopoly in the computer data storage microindustry. Both companies are relatively well insulated from competition, due to a number of economic phenomena that work in their favor. The most significant of which is the relatively high barriers to entry posed by equipment investiture and the immense investment necessary for research and development.
Entrepreneurs that attempt to break into this space will likely need billions to stand a chance of acquiring a significant % of market share. Even companies that are capable of acquiring funding to the tune of 10 digits will need to develop extremely complex hard drive production systems if they are to stand a chance of competing with companies such as WD and Seagate.
Another challenge is that manufacturing data storage devices is essentially perfect competition. Most consumers couldn’t tell you if the hard drive in their laptop is made by Western Digital, Seagate, or a smaller hard drive manufacturer. Computer data storage manufacturers operate a microindustry that presents a unique set of challenges for would be competitors. Pure Storage could be considered a Western Digital competitor in the flash storage space, but as far as hard disk drives go, these two established players really don’t have any true competitors.
Overview of $WDC and $STC
Seagate and Western Digital are two publicly traded companies with combined revenue that exceeds $30 billion US dollars. These two entities have strikingly similar financials, with $WDC and $STC each maintaining a market capitalization of over 13.xx billion USD. Their net income is also quite close, with Seagate taking home $1.65 billion and Western Digital $1.5 billion. Both Seagate and Western Digital are performing well across the board. Despite a constantly declining cost per GB, the global appetite for data is increasing as well.
Data Recovery – A Nested Microindustry
Products and services that are complimentary to computer hardware are responsible for countless microindustries in subsections of the expansive “tech” space. Data storage technology has improved dramatically over the last few decades. While WD and Seagate drives are excellent; no technology lasts forever. Hard disk drives are no exception. Hard drives break, network attached storage (NAS) can go offline, and RAID systems fail.
This phenomena is responsible for another microindustry, where companies like Gillware Data Recovery, restore lost, destroyed, or deleted files. Only a handful of labs around the world are capable of the delicate procedures necessary for NAS, SAN, and RAID data recovery. A close friend of mine (who preferred to remain anonymous) personally attests to Gillware’s refined customer service process, fair pricing structure, and expertise with her RAID 5 data recovery. The data recovery space isn’t limited to hard drives (and complex devices that rely on hard drives) either.
Many data recovery operations also offer smartphone, SD card, and flash drive data recovery services. Flash based storage technology will likely encroach upon the market share HDDs currently hold, and if the trend continues… Changes in the landscape of the computer data storage microindustry will likely have serious implications on the future of one or both of these companies.
Western Digital Poised to Dominate the Data Storage Market Through Tactical Acquisitions
In 2016, Western Digital completed an acquisition of SanDisk. While Western Digital had roots in manufacturing hard disk drive storage devices, the times appear to be shifting in favor of flash storage / flash memory. For the uninitiated, NAND flash storage is the technology responsible for data storage in mobile phones, tablets, solid state hard drives, and SD cards, MicroSD cards, and USB flash drives.
Since 2013, WD has acquired 7 companies that specialize(d) in solid state drives, SD cards, flash drives, and the NAND flash memory chips that power all of these devices. The crown jewel of these M&A moves occurred in 2016, with a 19 billion dollar acquisition of SanDisk. SanDisk was both a competitor and a compliment to Western Digital.
Different Types of Computer Data Storage
These devices enjoy increased shock tolerance due to the fact that they do not contain moving parts. Solid state drives are often an necessity for individuals who are regularly traveling in rural areas / off-road. For example, a researcher who is taking measurements of thousands of metrics associated with a particular ecosystem, region, or animal may be connecting their hard drive with instruments that are well off the beaten path.
While NAND flash based solid state drives offer advantages in durability and performance, they are also a more expensive technology than the established type of device SSDs aim to supplant, hard disk drives (HDD). When you use the term “hard drive” to describe the piece of equipment in your computer that stores your files, you probably aren’t thinking about the nomenclature of that device. Hard drives derive their name from hard disk drives.
Hard disk drives store data on rigid internal disks called platters. An interesting fact about hard disk drives is that they supplanted a widely used storage technology themselves. Before we turn back the clock to the Clinton administration, you can explore the history of solid state drives with the linked article.
MarketWatch appeals to a diverse array of financially minded individuals. While many readers will be familiar with the term “floppy disk”, there are also a number of younger individuals who either hadn’t been born yet or were indifferent to data storage technology when they were around the age where you wear diapers. While hard disk drives were invented in the 1950s, it was not until the 1980s that HDDs became a standard storage device for PC users around the world. Seagate played an integral role in the development, standardization, and proliferation of hard disk drives.
Computer Data Storage Microindustry Conclusion
First-mover advantage is helpful, but it only gets you so far. In the unbiased opinion of a financial analyst with over a decade of experience analyzing the economics of various microindustries; Western Digital has made a significant investment in the future of data storage technology; Seagate certainly isn’t drowning (they had over a *billion* dollars in income this year), but Seagate has far less exposure to flash storage devices, which appear to be gaining market share rapidly. Accounting for all of this information would lead the logical investor to assume Western Digital may begin to pull away from Seagate in the coming years.