Despite the decline in demand for PCs by almost 14% in the first three months of 2013, both Seagate and Western Digital revenues for the recently-ended quarters are above analysts’ estimates. It is true that customers are shifting from PCs to smartphones and that this should have an impact on hard drive sales, but this move is more than being offset by the rise in demand of cloud storage. Industry figures show that the cloud is becoming increasingly popular and the demand for cloud-based storage is increasing by approximately 30% year-over-year. Additionally, Western Digital Corp. (NASDAQ:WDC) expects a 3% increase in hard drive sales by the end of the year. In 2012, Seagate paid a healthy dividend of $372 million and announced a dividend of $0.38 for the quarter that ended in March 2013.
Because of increasing demand for SSDs and decline in the PC market, investors are worried about the future of Seagate and Western Digital. As SSDs are expensive, most companies will take their time when it comes to completely abandoning conventional hard disks. A website that provides online streaming services such as YouTube needs a huge amount of storage, and all of this storage is provided in tiered storage structures; this is a prime reason behind the profitability of both Seagate Technology PLC (NASDAQ:STX) and Western Digital.
Seagate and Western Digital Corp. (NASDAQ:WDC) are working hard to compete in the SSD arena. Last year, Seagate Technology PLC (NASDAQ:STX) acquired Samsung’s subsidiary for $ 1.4 billion and Western Digital purchased Hitachi’s for $4.8 billion. The increasing demand for cloud storage solutions will help both companies to maintain a stable growth despite shortfalls in PC demand, making them solid long term investments.
The article Can the Cloud Save this Failing Industry? originally appeared on Fool.com and is written by Red Chip.
Red Chip has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.