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Seagate Technology PLC (STX), Western Digital Corp (WDC): Do Hard Drives Belong in Your Portfolio?

Last month, Seagate unveiled its thinnest hard drive ever. While still too large for many ultra-thin laptops, the company demoed its ultra-thin hard drive on an Android tablet. Trefis predicts that Seagate disk drives will be used in 20% of all tablet devices by 2019, up from just 4% today.

Western Digital Corp (NASDAQ:WDC) recently acquired a company named sTec for $340 million dollars. STec claims to be the first company to have deployed solid state drives into large-scale enterprise environments. To date, it has shipped 14 million solid state drives to enterprise environments. Western Digital Corp (NASDAQ:WDC) is not about to be blindsided by a shift towards solid state drives.

Not wanting to be left behind, Toshiba is also innovating. The company recently released a new hybrid drive. This new family of hybrid drives is only 7 millimeters thick, the company’s thinnest ever.

Foolish final thoughts

The stocks of hard drive makers are priced as though hard drive technology will become extinct soon, an event that will inevitably be followed by the demise of companies than manufacture the technology.

There are two problems with this. First hard drive technology isn’t becoming extinct anytime soon. At this point in time, the massive differences in price between solid state drives and hard drives mandates that hard drives will be used for at least the next couple of years.

Second, by the time hard drives do finally become obsolete, the companies that create them will have moved on to making solid state drives. Seagate Technology PLC (NASDAQ:STX) and Toshiba are working hard on hybrid drives, which combine the performance of a solid state drive with the cost efficiency of a hard drive. Western Digital Corp (NASDAQ:WDC) made an acquisition this year to increase its presence in the solid state drive arena.

In conclusion, it appears to me that Western Digital and Seagate are both cheap right now. Pessimism has pushed those two stocks down, and nothing like pessimism to create a contrarian opportunity. Said pessimism does not appear to have cheapened the stock of Toshiba, a company that is not as dependent on its disk drive operations.

The article Do Hard Drives Belong in Your Portfolio? originally appeared on and is written by Ryan Palmer.

Ryan Palmer has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital. Ryan 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.

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