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SanDisk Corporation (SNDK), NetApp Inc. (NTAP), Teradata Corporation (TDC): Three Stocks to Profit From Data Growth

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SanDisk Corporation (NASDAQ:SNDK)With rising internet usage and population growth, data traffic and database volume is increasing day by day. According to IDC, database volume is set to increase to 40 zetabytes by 2020 from 2.8 zetabytes in 2012. The demand for data storage companies is constantly growing, as big companies need storage solutions to manage their databases efficiently. These companies have increased their spending on storage solutions. Three such data storage companies are continuously upgrading products offered and adapting to the changing demand. What do they have to offer to investors?

SSD is the way ahead in data storage

SanDisk Corporation (NASDAQ:SNDK)‘s solid state drive segment sales contributed 20% of the company’s total revenue in the first quarter of 2013, compared to only 10% in the first quarter of 2012. SSD is a device made of integrated circuits that store data. According to IHS iSuppli, global SSD revenue, both client and enterprise, is expected to rise from $7 billion in 2012 to $10.7 billion in 2013.

Client SSD should also show a significant demand growth of 53% year-over-year to 18.49 million units in the first quarter of 2014. Client SSD has an advantage in that it consumes low power, is much quieter, and is more reliable than its HDD counterpart. SanDisk Corporation (NASDAQ:SNDK) supplies SSDs to top ten personal computer manufacturers, and SSD sales are expected to contribute 25% to its total revenue in 2014.

In May 2013, SanDisk Corporation (NASDAQ:SNDK) made strategic changes in its share repurchase program; it will return 70% of free cash flow to its shareholders. It currently has $1.25 billion for repurchase by 2016. It will use $800 million in share repurchases this year. This will bring total shares outstanding down by approximately 13 million shares to 228.52 million shares. The company has already bought $230 million worth of shares in 2012 and $234 million this year as of May 2013 from its cash flow. This buyback will offset the dilution of shares, which happened due to employee incentive awards.

External storage is poised for growth

NetApp Inc. (NASDAQ:NTAP) has a 10.7% market share in the total data storage market, and it derives around 60% of its total revenue from its network attached storage, or NAS, segment. The worldwide NAS was a $5.2 billion market in 2012 and represents 22% of the overall storage market. The price of NAS products is less than $300,000. As companies adopt low priced network storage solutions, there is increasing demand for these products.

In addition, NAS installations are easier than other storage devices, which are very complex. With rising demand, the overall NAS market is estimated to grow at 12.2% CAGR through 2017, increasing its total data storage market share to 33%. This rising demand of NAS is expected to take the segment’s revenue to $4.01 billion in 2014 rising from $3.80 billion in 2013.

NetApp Inc. (NASDAQ:NTAP) has also announced a restructuring initiative to improve its operating margin. It is planning a workforce reduction of around 900 employees this year. This represents about a 7% reduction of the total work force. The company will also bear $50 million-$60 million as a pre-tax charge relating to severance. The company is targeting reduction in its under-performing areas. The workforce reduction will be from the Engenio division, as this division isn’t showing good results. NetApp Inc. (NASDAQ:NTAP) expects this restructuring will save it around $100 million annually before taxes from this year, which will rise next year.

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