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Hard Drive Storage Gets Small, Demand Grows Large

7/11/2005 02:00:00 AM Eastern

Having too much storage capacity for a desktop PC or notebook computer is no longer an issue, even with vendors rolling out external hard drives with half a terabyte of capacity.

However, this was was not always the case. During the late 1990s, when the 4.7GB DVD-ROM media and optical-drive categories were languishing in the PC business, industry watchers said the public was disinterested because the discs simply had more capacity than the average consumer, or software manufacturer for that matter, knew what to do with.

This problem seems quaint now at a time when two of the largest hard drive manufacturers announced that 500GB drives will start appearing in the second half of the year and in an age of video, digital imaging and music downloading, nobody is complaining that this is more capacity than a consumer needs.

“Every time we've reached a capacity level, it continues to grow. The majority of the sales now are in the higher capacity area,” said Stacey Lund, Maxtor's consumer marketing VP.

Going forward for the remainder of the year, hard drive vendors like Maxtor, Seagate and Western Digital will be busy filling the market with vast amounts of storage for devices that never before held a hard drive.

“We see people buying products for applications, not necessarily storage,'' said Rob Pait, Seagate's consumer products marketing director.

This is the major shift in consumer storage buying patterns that all the vendors identified.

The breadth that the storage industry has reached can be seen in Seagate Technologies product introductions last month. The company unveiled not only a standard external hard drive, but hard drives in a variety of shapes and sizes all for specific applications.

There was the 1-inch drive embedded in a CompactFlash card format — a small, light, disc-shaped drive that can fit in a person's pocket and plug into any computer through a USB port. The company is working toward creating smaller drives for cellphones and tough drives for the auto market.

The reason for branching out into all these areas is twofold. First, the technology is there. Building 1-inch platter drives for handheld devices is now the norm. Second, the ability to move content out of a home's PC is quickly growing. Wireless networking and Internet connectivity now allow consumers to directly download music and video onto PDAs, cellphones, notebook computers and portable music devices.

“Our penetration in non-PC products has gone up dramatically, and retail is definitely exploding,” said Sherri Besser, Western Digital's marketing senior director.

Possibly the strongest sign that consumers are finally grasping the need for storage is its growing presence in the mass merchants. Besser said Western Digital is now selling through Target and expects Wal-Mart to come online in the near future.

“This is very important from a retail growth perspective,” she said, “but we do need to educate the consumer that shops at this level.”

Lund added that consumers have just reached the point where they understand external storage, primarily from necessity. The huge numbers of digital images and music being stored on a PC these days has forced the average person to figure out how to properly store this data and ensure that the information stored on their computer is safe.

“We would much rather solve problems like back-up or photo storage,” Lund said.

Because solving problems is a priority for storage vendors like Maxtor, Lund said her company spends more time than ever before on software to bring more functionality to a hard drive product.

For the immediate future, small portable drives for use with notebook computers are expected to be the big sellers. Office workers are also using small drives as a portable filing cabinet to easily transport work home.

Looking forward, Seagate and Maxtor see hard drives invading the cellphone and PDA markets. Seagate's Pait said their hard drive technology is there to make these products possible, but the drive's size still has to be reduced so an equipped cellphone or smartphone maker can produce a device compatible with what consumers use today.

For the most part the digital camera market is taking a pass on including hard drives. Lund said it is possible to build a drive to work in a digital camera, but flash memory is now so inexpensive that it makes more sense from a financial standpoint to stick with that format. Seagate is a bit more bullish on this category and has developed an 8GB 1-inch hard drive that fits inside a CompactFlash II case. Pait believes this will become the perfect solution for high-megapixel, prosumer-level digital cameras and camcorders. Seagate expects to ship the CF type drive by late summer.

In addition to creating drives for smaller devices these three companies see other potential areas of growth.

The auto market is the next area that hard drives will have a major impact. Seagate has completed a drive hardened to function in the very tough auto environment where temperatures can range from -22 F to 185 F. The hard drive will be either embedded in a head unit or located in a vehicle's trunk, much like a CD changer. The first after-market drives should be out in a year with factory-installed versions following a few years later.

Western Digital expressed less interest in this category and instead has updated a line of drives to catch the PC gamer's eye. The Extreme Lighted drives let the user change the color to suit their mood, Besser said, and they hit stores this month in 160GB and 320GB capacities. Previous versions were just one color.

“This is conservative Western Digital on the edge,” she laughed.

Maxtor is researching a server-type device that would work with a wide range of computer and audio/video products, but Lund admitted it is a daunting task to create something that is compatible with such a wide range of hardware and software systems.

Despite all of these new market segments being developed, the primary money maker will continue to be internal and external hard drives. Besser said that despite the ease of use associated with external drives, primarily the fact that they plug into a USB port, Western Digital still sells more internal drives at retail.

“The fear of opening the box is still there, but most people now know someone who can do it for them,” she said.