The fifth in a series examining the outlook for five sectors. S&P analysts have just one overweight recommendation: information technology

With prices of flash memory chips dropping fast, Apple is likely to make the switch from hard drives to flash for all its music players

With prices of flash memory chips dropping fast, Apple is likely to make the switch from hard drives to flash for all its music players

The hard-drive company’s CEO puts acquisition rumors to rest and opines on the state of the data storage industry in the U.S.

The Seagate founder’s flamboyant personality was integral to his ability to inspire talent and propel innovation

Google (GOOG) buys a lot of hard drives. Consider that every time you do a search,
Google stores information about things such as what you searched for,
at what time, and how long it took you to find it. Increasingly in the Web 2.0 age, service providers also store our e-mail, documents, spreadsheets, Web pages, books, music, video and more.

Google’s not alone in this storage-buying bonanza; MySpace (NWS), Yahoo (YHOO) and Microsoft (MSFT) also digitally warehouse dizzying amounts of information every second, and have plans to store even more. In a way, the story of the mobile revolution is the story of both communication and storage – storage “in the hand,” through devices like Apple Computer’s (AAPL) iPod, and storage “in the cloud” on remote servers, through the likes of Yahoo Mail, Google Docs & Spreadsheets, and YouTube.

• Which will win, Xbox 360 or PS3? Try Seagate.

So when I talked to Seagate (STX) CEO Bill Watkins (pictured above) recently, I had a lot of questions about storage in the cloud. Mainly I wanted to get some sense of how excited the world’s largest hard drive maker is about the market opportunity in Web services, how frequently huge customers like Google buy more storage, and what kinds of advances Web services providers are demanding from the hard drive industry. Here’s a flavor of what Watkins told me:

Fortt: How big is Google for Seagate’s business?

Watkins: I’m not allowed to talk about it, but they’re big. They buy storage unbelievably. The more MySpace, the more stuff, the more content that gets on the Web, the more that’s got to be stored. … It’s not just how much content, it’s how much of the same content. And that’s what people are misunderstanding. We can calculate all the books and movies in the world, and we come up with this much. What they don’t realize is all those books and movies are being stored in a half a dozen different places.

Fortt: What is Google telling Seagate it wants in future storage products?

Watkins: Cost per gigabyte. I need as much capacity as I can get for as cheap as I can get it. And give me power savings. (2.5 doesn’t help them on power, because it’s got more motors, and they’ve got a bunch of these things strung together.) They’re buying hundreds of thousands of drives. Massive amounts of storage. So they’re really concerned about the cost of that storage, and obviously reliability – obviously you’ve got to meet the reliability and quality issues. But it’s really about cost.

Fortt: How often do the big Web services providers replace their storage drives?

Watkins: Right now we know that when you do a 50 percent increase in capacity per drive, every time you increase the capacity for a 3.5 or 2.5, the power savings almost compensate for replacing the unit. A lot of people just say fine, I don’t want to spend that much cash.

Fortt: But if you’re as big as a Google or a Microsoft, it’s pretty much a simple calculation?

Watkins: Exactly. Just cost. They figure it out, and they say OK, I’ll do this.

Fortt: You told me that right now Seagate is increasing capacity about 40 percent a year. So roughly every 15 months, you can make the case to the big players to upgrade their storage. What does the future hold?

Watkins: We’ll be out with a terabyte next year. Probably in the springtime, something like that, we’ll be out with the terabyte drives. They’ll start hitting the market, and it’ll be interesting to see how the people who are just using 400s and 500s are going to go. We just morphed into 750, and we’re going to morph into terabytes.

• Hard drive price war: The scramble for Maxtor’s leftovers

Original post by noemail@noemail.org (noemail@noemail.org (Jon Fortt)

The next-generation console wars are about to begin in earnest, and it’s a safe bet that either Sony’s (SNE) PlayStation 3 or Microsoft’s (MSFT) Xbox 360 will win the hearts (and wallets) of gamers. But if you’re placing financial bets, whose hardware should you bank on?
Here’s a thought: Seagate (STX).
I drove down to Scotts Valley on Thursday to chat with Seagate CEO Bill Watkins, possibly the most straight-talking, down-to-earth Silicon Valley executive ever. I’ll bring you bits of our conversation over the next few days, but one interesting piece centered on gaming.
I asked Bill which segments of the hard drive business are most exciting to Seagate from a revenue and profit perspective. (Keep in mind, Seagate is the world’s biggest hard drive maker, with a $14-billion market cap.) He mentioned DVRs and desktops – and quickly mentioned gaming.

And the winner is … the Wii

“Gaming is pretty big too, still. We’ve […]

Original post by noemail@noemail.org (noemail@noemail.org (Jon Fortt) and software by Elliott Back