However, the biggest challenge here is to convince clients to switch to SSDs, which is six times more expensive than a traditional hard disk drive manufactured by Western Digital. However, I believe that with the slowdown in prices and the emergence of hybrid devices, SSDs, which are mainly used in high end laptops, will eventually dominate this market. This is also reflected in the booming growth of the SSD market, which, according to data provided by the research firm IHS, will become a $22.6 billion industry in the next four years from less than $7 billion last year. The adoption rate of SSDs used in laptops, in particular, will grow steadily from around 10% this year to more than 30% in the next couple of years.
However, unlike NAND, where SAMSUNG ELECT LTD(F) (OTCMKTS:SSNLF) competed with Toshiba, Micron Technology and SK Hynix, in SSD, Samsung’s rivals will be industry titans such as Intel Corporation (NASDAQ:INTC) and SanDisk Corporation (NASDAQ:SNDK).
SanDisk Corporation (NASDAQ:SNDK) released its quarterly results on Wednesday, in which it met the revenue and beat the earnings estimate by a big margin. The company has been operating under a positive supply/demand balance which has translated into a 47% increase in its stock this year. Although it is trading near its 52-wek high but I am bullish on this stock and it could go much higher. Its current PEG ratio, based on estimated data for the next five years, is 0.47, which indicates that the stock is still undervalued and a bargain.
Conclusion
Despite missing estimates, Samsung is still making record profits and is still growing. I believe that with new product arrivals and strong prices of memory chips, the company could very well continue to post record levels of profit, therefore the outlook is stable. The company is not just about smartphones but has a diversified business .
However, SAMSUNG ELECT LTD(F) (OTCMKTS:SSNLF) is certainly not growing as quickly as investors would have liked. Then there is some uncertainty surrounding some of the new products, such as the wearable gadget Samsung Gear and the open-source operating system Tizen-based device. Nobody knows how they are going to perform, but I believe that they would, at best, compliment the current earnings.
SSDs on the other hand is far more reliable. Investments here will allow Samsung to tap into a market that will show robust growth in the coming years. This could also allay the investors’ fears coming from the weakness in its logic chip business.
The article This Gadget Maker Is Diversifying originally appeared on Fool.com and is written by Sarfaraz Khan.
Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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