Analysis of Data Storage Industry

Western Digital, Seagate, NetApps, STEC

Group 8
Wade Johnson, Brett Sims, Eric Smith, & Tyler Dunn

Scope & Approach

Discussion focuses on the Data Storage Devices Industry specifically the following companies:
Western Digital Seagate Technology NetApp STEC Industry Analysis Analysis of Company Strategies Analysis of Profitability Analysis of Risk

Presentation approach will be based on:

Data Storage Devices Industry Overview

Consistent and Significant Growth Reduction of Unit Prices Future: Innovation to Increase Storage Capacity and Data Transfer Speed Operating in an Increasingly Stringent Regulatory Environment

Porters Five Forces Approach

Threat of New Entrants

Barging Power of Suppliers

Rivalry Among Existing Firms

Barging Power of Buyers

Threat of Substitutes

Industry SWOT Analysis

Analysis of Company Strategies

WDC Nature of Product or Service Manufactures Geographical Diversification Industry Diversification Technology
Design, develop, manufacture, sell HD drives

STX
design, develop, manufacture storage for enterprise consumer and mobile devices. Also provides data storage services Hard disk drives

NTAP
enterprise storage and data management SW and HW products and services

STEC
designs, develops, manufactures, and markets custom memory solutions based on flash memory and DRAM DRAM, Solidstate drives, and small factor storage Sells its products through direct sales force, manufacturers representatives, and OEM distributors in the US and Internationally. Global

Hard disk drives

HW and SW products and services

manufacture and marketing Mostly to energy, financial Manufacture and market worldwide. Focus on the services, life sciences and World Wide consumer and small-to healthcare in US, Germany, medium-sized business. and Internationally

Global

Global

Global

HDD for PC and MAC; the HDD market, PC's, Data protection HW and SW, enterprise systems, mobile Flash memory, soild state Enterprise storage data retention and archive computing, consumer subsystemns, consumer product, storage security. drives, USB flash, and DRAM electronics, internal & electronics Support & education services network storage Micron Technology, Samsung EMC Corp, Hewlett-Packard Electronics, SanDisk, & Data Corp, Hitachi Data Systems Storage Devices

Competition

Primarily Fujitsu & Micron

Fujitsu & Western Digital

Analysis of Company Strategies

Success of implementing the strategies
Western Digital HIGH The Company is the worlds leader in hard disk drive revenue. Seagate Technologys HIGH The Company is the worlds leader in Hard disk drive shipments. NetApp - HIGH The firm pioneered Network Adapted Storage leading to significant growth STEC Moderate While they trail their two main competitors in market capitalization, they realized significant EPS growth

Analysis of Profitability
ROA %
25 20 15 10 5 0 2008 2007 2006 Western Digital Seagate Technology NetApp STEC Average

Profit Margin for ROA

Profit Margin for ROA
18 16 14 12 10 8 6 4 2 0 Profit Margin for ROA Western Digital Seagate Technology NetApp STEC Average

2008 11.2 12.88 13.81 1.87 9.94

2007 8.2 9.6 14.27 4.61 9.17

2006 9.2 11.13 16.89 10.02 11.81

Total Asset Turnover

Total Asset Turnover Western Digital Seagate Technology NetApp STEC Average 2008 2.10 5.16 0.85 1.09 2.30 2007 2.20 4.99 0.81 0.90 2.23 2006 2.30 4.37 0.73 1.19 2.15

Analysis of Profitability $$$ in Mil

Western Digital 2008 Sales 8,074 2007 5,468 2006 4,341 2008 12,708 Seagate 2007 11,360 2006 9,206 2008 3,303 Net Apps 2007 2,804 2006 2,066 2008 227 STEC 2007 189 2006 216

COGS

6,335

4,568

3,512

9,503

9,175

7,069

1,290

1,100

810

156

132

147

Selling & Admin Other Inc & (Expense) Income Taxes Profit Margins for ROA Receivable Turnover Inventory Turnover Fixed Asset Turnover

220

179

66

659

589

447

1,247

1,043

687

44

35

29

(25)

28

16

(47)

(53)

50

69

58

42

22

114 11.2% 10

(121) 8.2% 9

(13) 9.2% 10

67 9.9% 9.1

(352) 8.0% 8.0

84 9.1% 7.3

73 14.0% 5.6

62 14.6% 5.6

84 16.9% 5.8

(3) 1.9% 5.9

(5) 4.6% 5.4

(12) 10.0% 5.8

18

20

20

5.5

5.4

5.3

10.9

10.9

10.0

3.4

3.2

3.3

5.2

5.0

4.4

1.3

1.9

2.1

2.0

8.1

21.9

Short-term Liquidity Ratios

Quick Ratio
4 3.5 3 2.5 2 1.5 1 0.5 0 WDC Quick Ratio 1.4 STX 0.78 NTAP STEC 0 0.82 3.36 WDC STX NTAP STEC 150 100 50 38.6 40.11 55.56 300 250 200 228.68 350

Days Receivable

Liquidity Analysis
COGS as % of Sales
STEC NTAP STX WDC
5,000 10,000 15,000 20,000

Tax as a % of Sales
STEC NTAP STX WDC
90% 92% 94% 96% 98% 100%

WDC Sales COGS 6,335

STX 9,503

NTAP 1,290

STEC 228 156 Sales Income Tax

WDC 114

STX 67

NTAP 73

STEC 228 (3)

8,074 12,708 2,243

8,074 12,708 2,243

COGS % of 78.5% 74.8% 57.5% 68.4% Sales

Tax as % of 1.41% 0.53% 3.25% -1.32% Sales

Conclusion
Western Digital and Seagate Technology are solid grow with the industry performers NetApps could outperform the hardware only manufacturers by providing data management services. STEC is a riskier bet on the growth of solid state storage in the market

Sources
S&P Net Advantage Gale Business & Company Resource Center Yahoo Finance Storage Networking Industry Association International Committee for Information Technology Standards Company Websites SEC/Edgar Online