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iSupply Predicts HDD Market Is Rebounding

El Segundo, Calif. — iSuppli is forecasting that hard-disk-drive (HDD) shipments will grow in concert with rising PC sales and growth in the DVR and set-top box (STB) categories in the second half of the year.

In the market research firm’s latest report on the HDD category, A Sweet September: Storage on the Rebound, iSuppli reports that prices fell by about 20 percent per quarter for select equivalent-capacity notebook HDDs, declining from slightly more than $100 in December 2006 to about $65 in early June 2007.

According to a release from the firm, “The deep price cuts inflicted so much pain upon the suppliers that they decided from the mad rush to gain market share.”

Though the group still expects pricing for equivalent-capacity HDDs to decline marginally, “in the 4 to 6 percent range in the fourth quarter,” overall the firm is still optimistic that “business conditions have turned for the better in the second half of 2007 and will continue to improve into 2008.”

The research firm expects HDD shipments to increase with global PC unit shipments, which it said will rise by 9.8 percent sequentially in the thirds quarter and by 12.4 percent in the fourth quarter. At the same time, the group said worldwide HDD shipments will increase by 15 percent in the third quarter and 11.3 percent in the fourth quarter.

STB and DVR systems are also expected to drive HDD demand in the second half of the year. iSupply said sales in this segment are expected to rise to 22.7 million in the second half of the year, up 22 percent from 18.6 million in the first half.

The firm estimated that global HDD shipments grew to 132.5 million unites in the third quarter, up from 115.3 million in the second quarter.

iSupply also pointed to the recent experiences of specific manufacturers like Seagate Technology and Western Digital as additional signs that the HDD market is rebounding as both recently reported positive third-quarter results.

Seagate’s gross margin rose to 24.6 percent in the third quarter, up from 21.3 percent in the first quarter, with its margin expected to rise another 1 percentage point in the fourth quarter. The company’s revenue rose to $4.4 billion in the third quarter, up from $2.8 billion in the first quarter. The company expects revenue to be about $3.5 billion in the fourth quarter.

Western Digital also increased its cross margin from 15 percent in the second quarter to 18.4 percent in the third quarter.

iSupply also noted in a release that Hitachi reported that it had narrowed its losses in the fourth quarter and is looking forward to a small operating profit for its HDD operations.

The firm noted that all three companies had said they either sustained or improved on their average selling price per HDD unit compared with the previous quarter.

Based on this information, the iSuppli concluded, “The HDD rebound bodes well for storage products across a broad spectrum of technologies, including flash, optical, tape and finished systems. The strong demand shows applications are continuing to generate more data and content that must be stored in different formats and media.”