Why Have Seagate and Western Digital Had Rough Years So Far?

Why Did Seagate Technologies' Shares Fall Last Week?

(Continued from Prior Part)

Mizuho had lowered its target price for Seagate

Shares of Seagate Technology (STX) fell by 13% in the week ending January 22, 2016. On January 19, 2016, the investment company Mizuho cut its price target for the company from $38 to $32 and provided a “neutral” rating on the stock.

Meanwhile, SanDisk (SNDK) fell by 9.9%, whereas shares of Western Digital Corporation (WDC) fell by 9.1% in the week ending January 22. Shares of WDC have fallen by over 42% in the past six months, after it agreed to buy SanDisk in yet another big deal in the semiconductor space on October 21, 2015. Shares of Seagate have also fallen by 32.9% since the merger announcement.

Western Digital and Seagate account for 80% of the global HDD (hard disk drive) market. In the last few years, the HDD market has shrunk, while the SSD (solid state drive) market has expanded.

Western Digital has also acquired Hitachi’s hard drive business. Hitachi is a major player in Japan’s (EWJ) technology sector, and now Western Digital is projected to account for 14% of the SSD market after its proposed merger with SanDisk, which would make it the second-largest player in this space after Samsung Electronics (SSNLF).

Prices of storage products have fallen significantly

As you can see in the above table, SSD and HDD prices have been falling. They’re expected to continue to fall in the coming years as well. These falling prices have increased the adoption of SSDs in laptops.

DRAMeXchange senior manager Alan Chen expects the SSD adoption rate in new consumer laptops to rise from an estimated 26% in 2015 to 42% in 2017.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Weak Demand and Inventory Drove Seagate’s Lower Guidance

• Part 2 - How Will Lower HDD Shipments Affect Seagate Technologies?

• Part 3 - Why Does Seagate Need to Focus on Lowering Operating Costs?