Analysis

posted on 25 July 2008 12:32

Western Digital has a pretty negative view of the solid state drive (SSD) market apart from enterprise applications and, possibly, netbooks' use.

Asked about it in his earnings call, WD president and CEO John Coyne said: "... we’re looking at it in three distinct market applications for SSDs, the first of those being in the high-end enterprise, which is an [inaudible] requirement, a performance requirement, not really a large storage requirement. And so we’ve seen announcements in that space. We believe that there’s some compelling value being offered there and there certainly seems to be an economic case, as well as a technical case for deployment of SSDs into that kind of environment."

"The second area where SSDs have probably been most heavily marketed and have been lightly distributed is in the high style notebook arena -- full featured, full sized notebook, things like the Macbook Air and several announcements from most of the PC notebook manufacturers. In that space, we believe that the customer experience, those few customers who actually have one, that the customer experience has been essentially negative, relative to the overhyped benefits. And that that potentially puts back -- that and the cost put back the adoption rate probably by 12 months against current forecasts."

"And then the third area of application has been in the ultra-mobile PC, or the SUSE EPC type market, which is a market focused on meeting price point and providing a level of functionality at a price point. What we are seeing there is the first generation of those devices, essentially they were with four, eight, 12-gigabytes of Flash memory, and what we are seeing in this year’s announcements over the last couple of months of the second generation is that that market seems to be bifurcating to on the low end, $399 type price point, a 7-inch screen with a 12-gig of SSD and probably a Linux operating system. And then a more functional, more feature, richer machine at somewhere in the $400 pricing point, which is going to a 10-inch screen, operating an XP-based system, and incorporating a 2.5-inch hard drive. So that’s kind of how we are seeing that shaking out."

"And it looks like the low-end machine is beginning to develop some penetration in completely new markets that have lower disposable income levels than the markets currently being served by the entire PC portfolio, and we are seeing the higher featured machine targeted as incremental sales into developed markets, where a second PC or a third PC is being bought in that fashion."

Asked where he thought SSD market share was in 2008 and would be in 2009, Coyne replied: "It’s really hard. I don’t think it gets into more than one decimal place." We take it that means less than 1 percent.

An analyst asked a question about whether the ST HDC acquisition will allow WD to design a controller for a solid state drive or only for the HDD controllers. Coyne answered: "We will have the capability to design a controller for any media and any interface."

Since the STM acquisition referred to a hard drive motor controller, which non-mechanical SSDs just don't need, we think Coyne, who plays future product cards very close to his chest, was talking generically and stone-walling the hidden question which was 'will WD introduce an SSD?'

What we might glean from all this is that WD could introduce an enterprise SSD but is less likely to introduce SSD technology for the other two markets Coyne identified.

^{[Chris Mellor.]}