twice connect
careers

Vendors See USB Drives Ready To Take Off

1/09/2003 02:00:00 AM Eastern

With less than one year of retail sales under its collective belt the USB drive category is still in the process of finding its niche in the market, but vendors believe 2003 could be the breakout year for these devices.

Citing the ability of these drives to store large amounts of data and be quickly connected to any USB-equipped PC or notebook, manufacturers say they should find interest among consumers and businesses. USB drives are portable flash memory devices that are about the size of a cigarette lighter and plug into a computer's USB port. Standard capacities range from 32MB to 512MB, and since the drive contains the software driver it will automatically work with any computer.

Despite these benefits USB drives still have to define their own niche in the portable storage category space, most likely falling in between the still popular 1.44MB floppy diskette and CD-R/RW media. Relatively steep pricing, compared with these established formats, could be the drive's largest obstacle in becoming a high-volume seller.

However, M-Systems, the company that created the category, is projecting a quick sales ramp-up, with 12.5-million units shipping worldwide from all manufacturers in the category in 2003, increasing to 100 million in 2004 and 250 million in 2005. For most of 2001, U.S. domestic sales were almost nonexistent according to M-Systems, with almost all of the 2.5 million-units expected to ship domestically next year to go into the business and enterprise channels, Phelps said.

"We are very bullish on this particular product, said Jamie Cito, Fuji's product manager for computer devices, "sales have grown exponentially over the past few months."

One industry analyst said that having average prices of about $90 for 128MB and $125 for 256MB drives makes them a bit to pricey to take off.

"My sense is that they are too expensive and haven't yet gained traction," said Steve Baker, NPDTechworld's director of IT research. Determining where in a store the drives should be sold is another question to answer, he added, but he did give the devices a thumbs-up when it comes to ease of use.

Steve Fung, Memorex's product manger for flash media, sees a fast ramp-up in sales next year, but agreed that the drive's cost could hinder sales to some extent. Despite this, the potential size of this market has attracted about a dozen companies to the category.

Sony, M-Systems, DiskOnKey and Targus were among the first to have products available, although Targus has bypassed retail to concentrate only on the Fortune 1,000 market, said Les Dotson, the company's product manager.

Sony's first MicroVault drives were introduced about a year ago and have sold well, particularly when the products are well promoted by retailers, said Shane Higby, Sony's senior market manager for MicroVault.

Fuji introduced the Fuji USB Drive in August with the first products hitting stores in November. Although the company is already heavily involved in the blank media category, Cito said, it sees these drives as something separate.

"We wanted this to diversify our storage product mix. We needed a portable storage device," he said.

Despite the close relationship between USB drives and the ubiquitous 1.44MB floppy diskette, Cito does not consider the drive to be a potential floppy replacement. Part of his reasoning is the disparity in capacities between the drives and the fact that a floppy is usually used as a permanent storage platform whereas the drives are meant to be used over and over.

"People are using them for things like storing PowerPoint presentations and high resolution files that cannot be e-mailed," he said.

Cito was alone in this belief. Fung, Dotson and Higby said the floppy is no longer capable of fulfilling its role in a technological world dominated by huge high-resolution images and audio files.

"The 1.44MB floppy just doesn't serve its purpose anymore because files are just too large," Fung said.

Vendors are also split over whether the drives will be more popular with consumers or business buyers. Fuji's Cito and Memorex's Fung see the consumer model dominating, while Targus' Dotson believes the exact opposite track is correct.

"Retailers told us to not even bother selling these," he said.

Sony is splitting the difference. Higby said the company's early customer research indicated that corporate sales probably outpaced consumer sales by a small amount in 2002, but as consumers become more educated this could change.

Another problem that needs to be worked out to maximize retail sales is where these devices should be merchandised. Higby and Fung said most retailers are selling them in the flash memory and storage sections, but this needs to be clarified.

"We think it should be in storage, but some retail buyers see them as an extension of the flash cards," Higby said.

The one fact derived from the first year of sales that all the vendors agreed upon was that the 128MB and 256MB drives are what consumers and businesses want. Sony was certain that the 16MB version would be popular because of its low price, but these low capacity models are just not selling.

The next step being taken to make the drives even more useful is the inclusion of software applications specifically for the drives, said, Blaine Phelps, M-Systems' promotions director. These titles will be created by the various hardware vendors and third-party developers, he said. A software developer's kit has already been put together and Phelps expects dozens of titles for M-System-based USB drives to be available soon. Targus has an enterprise level application available called PocketThink that features encryption and backup software.

The addition of software is on the product road maps of the other vendors.

"We will now see the applications drive this market," said Phelps, adding he expects application development for DiskOnKey to grow in the same manner as that of the Palm OS.

The next technological advance is upgrading the device's USB connection to USB 2.0. Sony has started feeding some units into the channel last month and Fung said its USB 2.0 ThumbDrives will launch sometime in 2003. Targus is waiting until later in 2003 before it upgrades its line, Dotson said, because that is when large numbers of USB 2.0 notebook computers will be available.

The next generation of drives will jump to the 1GB level, said Cito, which would probably mainly interest corporate IT departments.

Other new drives are from Iomega and Lexar Media.

Iomega has introduced the Mini Drive line, which initially consists of devices with 64MB and 128MB of capacity. A company spokesman said Mini Drive would be available at Fry's Electronics and Micro Center in December, with general retail distribution expected during the first quarter of 2003. The drives will have respective suggested retail prices of $64 and $99. A 256MB version is expected next year.

Iomega ships the drive with a proprietary graphic user interface and a security interface that features password protection for the stored data. Consumers can also purchase and download from the company Web site Iomega Active Disk applications for use on the Mini Drives.

Lexar's contribution to the category is the JumpDrive 2.0 Pro. This is the first USB 2.0 drive to ship. Its download speed is about six times faster than current USB 1.1 drives on the market. Limitations in USB drive technology do not allow USB 2.0 drives to take full advantage of that format's true data download capability, which is about 40 times faster than the older version.

Lexar is shipping one 256MB SKU with a $199 suggested retail.

PHOTOS
ProSource Meeting Filled With Optimism

San Antonio — Optimism reigned at ProSource’s

Ingram Draws 500 To Spring Vendor Expo

Scottsdale, Ariz. — Ingram Micro Consumer

CEA Holds ’14 Digital Patriots Dinner

Washington — CEA held its annual Digital Patriots’

8 Technology Accessories For a Greener Earth

An Earth Day review of Earth-friendly products, by

BrandSource Shows Diverse Product Selection

BrandSource’s Summit show at the Marriott World

Scenes From Toy Fair

By Lisa Johnston

ADL Honors Morales, Bilas, Paull, Weedfald At Annual Dinner

New York — The Anti-Defamation League’s National