Hard Disk Companies and Windows Vista

Posted on October 7, 2005 , filed under Stocks | Print This Post

Hard Disk manufacturers have lost their luster over the last few years. This is largely due to the lack of software applications to take advantage of the increased size and speed of new hard disk drives. The most consumers centric, storage intensive application on the computer is recording digital video which consumers have failed to adopt. No near term catalyst, something like a video iPod, is available to drive the distribution of video files among the masses. Broadband speeds are also not quite ready to handle video distribution. While computer enthusiasts will continue to upgrade, I believe the majority of consumers simply do not require a drive larger than 200GB. With 200GB drives hitting retail channels at under $50, margins for manufacturers have been sharply reduced. The evident price drops lead to speculation that hard disks have lagged behind CPU, memory and video card upgrades in computers.

The price of stocks for hard disk manufacturers has reflected the lack of interest by consumers in upgrading. The traditional big three, STX, Seagate Technology , WDC, Western Digital Corp., and MXO, Maxtor Corp., have all fallen well below their one year highs. The drop seems to be spread among all the hard disk manufacturers rather than focused on a single company.

Without storage centric applications, I see one other reason for consumers to upgrade. If Microsoft releases a bloated operating system that causes computers to slow down, necessitating an upgrade for users to enjoy their experience, consumers will upgrade. This is exactly what Microsoft is doing. If you haven’t seen the absolute minimum specifications for the new Windows Vista operating system, here they are:

1.4 GHz processor
256 MB memory
64 MB videocard
7200 RPM HD 2 MB cache

As many of you know, the minimum requirements would equate to long loading times and sluggish performance. Microsoft has never written code to run faster on older hardware with each new operating system release. In the long history of the company its never happened. Microsoft is aiming at 5-10 second boot times and a customizable partially 3D environment for end users. Windows Vista is slated to be released by the middle of 2006.

Savvy investors should keep hard disk manufacturers on the radar as Windows Vista approaches. Hard Disk manufacturers are in the process of releasing products utilizing faster than 7200 RPM speeds and debuting new cache technologies. Vista is technologically and resource wise a bigger upgrade than Windows 2000 to Windows XP. My top pick among the storage companies is STX. STX has gained a solid reputation among enthusiasts for providing acoustically quiet drives coupled with reputable quality, as a result STX has enjoyed growing market share. STX will announce its earnings on October 18th. I will be watching the results to see if a buying opportunity exists.

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