Why Seagate CEO Bill Watkins Isn't Worried About Flash

by: Eric Savitz March 16, 2007 | about stocks: STX    
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If you are an investor in disk drive stocks, you might be a little anxious about all this discussion about parts of the drive market being replaced with NAND Flash based memory. Seagate (STX) CEO Bill Watkins would suggest you calm yourself down.

I had an illuminating conversation with Watkins yesterday, and let me tell you right now, he’s a lot less worried about this than some people on the Street seem to be.

Watkins thinks investors are “missing the whole point.”

Flash and hard drives are “synergistic,” he says. The big driver for the data storage market, he says, is the ongoing shift of information - video, music, data - from physical distribution to digital distribution. “It’s all enabled by storage,” he says. Someone has a video on a server. They back it up. Someone downloads it to their PC. They back it up. They move a copy to their portable device. Every piece of content keeps replicating, and in every instance creates a need for storage. And Watkins thinks most of that storage is going to be fulfilled by hard drives.

This is not to say that Watkins does not see a role for Flash. He does. It makes sense for devices where the amount of required storage is relatively low - like MP3 players. And he says Seagate and other companies are moving aggressively to create hybrid drives with some attached flash, speeding up the transfer of data, and allowing computers to boot faster. He says the first hybrid drives should be in PCs by the end of the year; eventually, he says, all drives are likely to include 4 GB of Flash, give or take a few gig.
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Watkins doesn’t find it very likely, though, that Flash is going to wholesale replace drives in notebooks any time soon. He notes that the smallest drive he sells for notebooks is 80 GB; it sells for about $60. Flash, he says, is selling for about $5 a gig. So if you want 60 GB of flash, it will run you about $300.

The overall point, he says, is that “the cost per GB is so overpowering for hard disks.”

True, he says, flash uses a little less power. But he says most of the power requirements in a notebook involve the screen, not the drive. And by adding some Flash memory on the drive, he says, you can eliminate that advantage. He also plays down any advantage that Flash might have in durability; drop a laptop or MP3 player, he says, and the biggest danger is not the drive, but a broken screen or keyboard. He also takes issue with the idea that Flash is more reliable: he contends that over time, the ability of flash to read and write erodes. A solid-state drive with regular use - the way you might use a laptop - wouldn’t last much more than a year, he contends.

Watkins also likes to point out that some of the biggest makers of Flash memory - Samsung, Toshiba (TOSBF.PK), Hitachi (HIT) - all also have big bets on hard drives as well.

As for whether Apple (AAPL) will introduce Flash-based iPods, Watkins says he would not surprised to see it announce a 16 GB Flash model. But he also thinks it won’t happen unless it can find a Flash provider willing to take a loss; the alternative is a price point that might not be appealing to consumers. Watkins wonders whether people will be willing to pay more for an iPod with a 16 GB Flash drive than they would for one with an 80 GB hard drive. He also points out that if you tried to download a high-def video onto a device with only 16 GB of storage, you would quickly fill it up.

As for solid-state based notebooks, Watkins says it is certainly feasible that for some applications - particularly where users are relying on data stored on the network - that someone might want one. But again, he wonders if many people will want to pay an extra $300 or so for a laptop with 32 GB of flash, rather 80 GB or 160 GB of hard drive storage.

Are disk drives dead? Not yet.

Seagate yesterday rose 28 cents to $24.60.

Earlier: Western Digital: Hambrecht Thinks The Stock Is A Huge Bargain

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Eric Savitz

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This article has 2 comments:

  •  
    Mar 16 12:44 PM
    Good information, thanks. My main thought on flash hard drives is that they will enable production of laptops that are thinner and lighter. At some point, laptops with full keyboards will be thin and light enough at a reasonable price that they could replace PDA's. Personally, I can't stand any of the PDA's because of the entry interfaces. Styluses, thumb typing, and the like are a pain to learn to use and are inefficient. I have looked at a number of "thin and light" laptops over the years, and they all were either not thin and light enough, or they were exorbitantly expensive. A laptop that was about 3/4" thick and weighs 4 pounds that cost $1,000 is what I would be willing to purchase, and then wouldn't need any kind of PDA.
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  •  
    Apr 11 07:52 AM
    " A solid-state drive with regular use - the way you might use a laptop - wouldn’t last much more than a year, he contends."

    Bill really is off base on this comment. While I do agree with his statements regarding hybrid drives, I think he's gathering the wrong information on reliability.
    Reply | Link to Comment
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