Western Digital Corp. (WDC), Seagate Technology PLC (STX): Should You Buy These Two Hard Drive Makers?

New innovations

To offer more innovative solutions to compete with Fusion-io, Western Digital and Seagate Technology PLC (NASDAQ:STX) have produced hybrid drives, which combine a smaller SSD and a larger HDD to produce a more cost-efficient product. When used in personal computers, the operating system can be installed on the faster SSD, while media and content can be stored on the traditional HDD. Both companies have also produced wireless external hard drives, which can be used with tablets and smartphones to compensate for the comparably lower storage capacity of mobile devices.

But looking ahead, the most exciting development comes from Western Digital, which is developing helium-filled drives. Helium conducts heat much better than air, and increases the cooling capacity of hard drives, extending their lifespan. Helium has one-seventh the density of air, which reduces the drag on the spinning platters, thus reducing energy consumption and allowing more disks (more storage) to be safely placed together. The result is a drive that consumes 23% less power but has 40% higher maximum capacity than current platter-based drives. IHS believes that the market for helium-filled HDDs will rise from zero in 2012 to over 100 million units by the end of 2016.

The Bottom Line

I believe that cloud-based demand will drive top line growth for both Western Digital and Seagate, giving them time to offer a diverse, well-balanced portfolio of hybrid and SSD products to consumers. Helium-filled drives, which will inevitably be copied by Seagate Technology PLC (NASDAQ:STX), could set a new industry standard and disrupt the growth of SSDs in the enterprise segment.

Investors seem to agree that Western Digital and Seagate have a bright future ahead. Their shares are respectively up 20% and 18% over the past twelve months, easily outperforming the NASDAQ’s 7% gain. I also believe that these two companies are solid long-term investments that are overshadowed by fears from investors who misunderstand their core strengths.

The article Should You Buy These Two Hard Drive Makers? originally appeared on Fool.com.

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