SanDisk Corporation (SNDK), Fusion-IO, Inc. (FIO), Imation Corp. (IMN): Data Storage Companies With Growth Potential

Increased growth in both structured and unstructured data is driving demand for data storage. According to TechNavio, the global data storage market is expected to rise at an annualized growth rate of 7.83% over the period of 2012-2016. Looking at the growth opportunities present in the data storage market, here are three companies desperate to grab higher market share. In order to do so, these companies are enhancing their portfolios through launching new products and going after acquisitions. Let’s find out how these companies’ new products will help improve investor confidence?

Enhancing revenue with acquisition and launching new products

SanDisk Corporation (NASDAQ:SNDK)SanDisk Corporation (NASDAQ:SNDK) recently announced plans to acquire Smart Storage System, a developer of enterprises solid state drive, or SSD, based on Serial advance technology attachment, or SATA, and Statistical analysis system, or SAS, storage protocol, for around $307 million. Smart Storage System will help SanDisk Corporation (NASDAQ:SNDK) capture opportunities in the $1.6 billion enterprise SATA products market and will expand its enterprise SAS product portfolio. This acquisition enables SanDisk Corporation (NASDAQ:SNDK) to build its leadership position in the enterprise SSD market. Further, this acquisition will strengthen SanDisk Corporation (NASDAQ:SNDK)’s “NAND flash memory,” which will improve its performance and reliability.

SanDisk Corporation (NASDAQ:SNDK) reported strong year-over-year revenue growth of 43% to $1.48 billion in the second quarter. The primary growth driver was extra-ordinary performance of its OEM division, which grew 57% year-over-year with support from SSD sales and mobile solutions. To continue increasing its earnings and margins, it introduced the world’s fastest 64GB micro SDXC card mainly for 4G smartphones, tablets, and action cameras. The growth of high-end smartphones, which require high memory bandwidth, will help SanDisk Corporation (NASDAQ:SNDK) grow further. The company expects to generate EPS of around $3.95 with an operating margin of 25% this year, compared to EPS of $2.37 and operating margin 16.3% last year.

Acquisition generating growth opportunities

To improve its hardware business, Fusion-IO, Inc. (NYSE:FIO) acquired NexGen Storage, a leading developer of hybrid storage appliances, for $119 million in April 2013. NexGen disk drive with Fusion-io Memory will serve small and medium enterprises. The combination of both the company’s products on x86 servers will create hybrid storage that will offer flash array at a lower price.

This combination will enhance the system’s data writing and reading capacity by up to 250 times, compared to a SSD-based system, and tripling the system performance. It is looking to attract new customers as well as retaining its existing ones by integrating new features into its storage drives. The company expects to deliver year-over-year revenue growth of 21.4% to $436.3 million in the fiscal year ended in June 2013 and $525 million in the next fiscal year.

Additionally, in June 2013, Spotify, a global online music leader, linked with Fusion-IO, Inc. (NYSE:FIO) to buy flash storage disk for it music data centers. Under this, Fusion-IO, Inc. (NYSE:FIO) will serve and accelerate the music databases of Spotify with its ioMemory platform. This will help Spotify accelerate delivery of music files from its Apache Cassandra database to its listeners globally. Therefore, Spotify users will be able to access music tracks instantly, and increase its footprint globally with new services. The growth of Spotify enables the company to enhance its gross margin, and adding more big names to its customer base will boost revenue. Fusion-IO, Inc. (NYSE:FIO) expects gross margin of around 60% this fiscal year, up from 55.8% last fiscal year.

Acquisition and new products offering growth prospects

To further strengthen its Tiered Storage and Security Solution, or TSS, and accelerate strategic transformation, Imation Corp. (NYSE:IMN) acquired Nexsan, a provider of disk-based storage systems, for $120 million in January 2013. This acquisition enabled Imation Corp. (NYSE:IMN) to expand its small and medium-size business and distribution enterprises storage market. TSS gross margins improved to 22% from 19.4% in the prior year period, and reduced year-over-year loss by 53.8% to $3 million in the first quarter.

In June 2013, it launched its next-generation object store, the Nexsan Assureon secure automated archive solution, which will reduce the cost, size, and complexity of backups. It will also serve government, health-care, financial organizations, which are witnessing rapid, unpredictable growth in digital content. This launch will improve TSS gross margin, and Imation Corp. (NYSE:IMN) is expected to report overall gross margin of 19.4% this year from 18.4% last year.

With the aim of enhancing its revenue and market share in the flash and hard drive business, Imation Corp. (NYSE:IMN) expanded its IronKey product line with new secure USB flash and external disk drives. The IronKey D80 flash drives and H80 hard drives are tamper-resistant and encrypted with strong authentication, which enable the user to keep data secured. The continuous demand for data security from government, defense, and pharmaceutical companies, offers revenue growth opportunity to Imation Corp. (NYSE:IMN).

Moreover, the company extended its advance security technology to serve the needs of more numbers of users and other organizations too. Users can configure both these drives with Microsoft and Mac operating systems, which will again provide further growth opportunities as these are the major operating systems in use.


With the rising demand of data storage and security, the companies in this industry are competing hard to gain market share. SanDisk’s acquisition of Smart Storage System and launch of new micro SDXC will enhance its revenue and increase EPS. Fusion-IO, Inc. (NYSE:FIO)’s acquisition of NexGen Storage and growth with Spotify will generate higher growth opportunities with increased revenue and improved margin. Imation Corp. (NYSE:IMN) is enhancing its product line, and the acquisition of Nexsan will improve its growth and its EPS.

Looking at this, I recommend buying all three stocks.

The article Data Storage Companies With Growth Potential originally appeared on and is written by Madhukar Dubey.

Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhukar 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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