Data Banks of the Post-PC Era

by Chris Connor

Over the past year, makers of PC disk drives such as Western Digital {WDC}, Maxtor {MXTR}, Quantum Hard Disk Drive {HDD}, and even Seagate {SEG} have experienced difficult times.  All four of these PC disk drive makers have witnessed lackluster revenues and stock prices.  This trend will likely continue as PCs continue to decline in price.  However, other areas of storage do not look so dismal.  In fact, the demise of the PC is creating substantial growth opportunities in storage due to the overwhelming use of the Internet.  All of the data that traverses the Internet has to be stored somewhere.  Strong demand for non-PC storage also gets a boost from the increasing use of such handheld devices as Palm Pilots and cell phones.  This strong demand for non-PC storage will likely raise the fortunes of several key companies in several key areas of storage. 

At first glance, it would appear that enterprise storage behemoth EMC {EMC} stands to benefit the most from the vast amount of data transmission that the Internet is facilitating.  However, there are other companies in other areas of storage that could benefit as much as, if not more than, EMC in the post-PC era.  Are these other storage companies unknown diamonds in the rough selling at inexpensive valuations?  Not really.  Wall Street has already started its love affair with such non-PC storage stocks as Brocade {BRCD}, Gadzoox {ZOOX}, Network Appliance {NTAP}, and Sandisk {SNDK}.  This attraction, however, unlike those based on a general affection for Internet stocks, is founded on some extremely solid fundamentals that are likely to continue to drive these stocks higher.  Basic exigencies fueling this growth include the aforementioned need to store Internet data, the need to manage all of this data more efficiently, the ability to store MP3 songs in MP3 players, and the ability to store data in handheld computers.

Companies like EMC, Network Appliance, and Gadzoox should benefit the most from the need to store Internet data. Investors should take note that these companies focus on three different architectures, even though EMC sells products in the other two storage architectures.  EMC is the worldwide leader in the enterprise storage system market.  EMC's primary products store, manage, retrieve, back up and share information from all the major computing platforms such as mainframe, Windows NT, UNIX, and Linux throughout the corporate enterprise of customers, suppliers, and employees.  Network Appliance is the leading supplier of network attached data storage devices with a market share of close to 42 percent.  Network Appliance's products reduce the retrieval time and increase the accessibility of data stored on a network.  According to the Internet Research Group, a market research firm, Network Appliance has the leading market share in Internet caching.  Cache products bring frequently accessed data closer to the end user, thereby reducing waiting times for user access to web sites.  Gadzoox, on the other hand, is a leader of a server-to-storage type architecture called the Storage Area Network, or SAN.  SAN has received an amazing amount of investor interest.  A SAN is basically a storage version of a LAN or Local Area Network connected by Fibre Channel.  Fibre Channel is a high-speed storage networking technology that serves as the backbone for SANs.  SAN represents the best performing networking storage technology today, as it eliminates bandwidth bottlenecks that were commonplace with older storage to server systems like SCSI.  Currently, no other storage architecture can claim the level of speed that SANs are capable of delivering. 

Companies such as Legato {LGTO} and Veritas {VRTS}, as well as EMC, provide network storage management software to protect data, ensure the availability of that data whenever it is needed, and manage the data efficiently.  The beauty of network storage management software is that it is not limited to one storage architecture.  Network storage management software supports all three of the storage architectures previously mentioned - enterprise, network attached storage, and SAN.