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Seagate, WD see exabyte growth with high-capacity enterprise HDDs

Unit shipments of hard disk drives (HDDs) may be on the decline, but the exabytes that Seagate Technology and Western Digital are shipping with their high-capacity enterprise HDDs is spiking.

Seagate noted during its earnings call today that HDD storage capacity hit a record 61.7 exabytes (EB) during the fiscal fourth quarter, on the heels of 60.6 EB in Q2 and 55.6 EB in Q3. Average per-drive capacity soared to a record 1.7 TB in Seagate’s fiscal Q4, which ended on July 1.

Steve Luczo, Seagate’s chairman and CEO, said demand was stronger than expected from cloud service providers (CSPs) in the fourth quarter. He noted that, on a year-over-year basis, average per-drive capacity grew 29%. In fiscal 2016, Seagate shipped 233 exabytes, including 70 exabytes for its “business-critical” product line – a 28% increase over the prior year.

Western Digital last week claimed to achieve overall exabyte growth of 12% on a year-over-year basis, largely driven by shipments of capacity enterprise HDDs to enterprise customers, according to Michael Cordano, president and chief operating officer. He said the growth of WD’s capacity-focused enterprise product line was 47% thanks to the ongoing success of high-capacity helium-based HDDs.

WD last week reported revenue of $13.0 billion for its last fiscal year, down 11% over last year’s $14.6 billion, and net income of $257 million for fiscal 2016. WD’s fourth-quarter revenue was $3.5 billion, and the company reported a $351 million loss.

Seagate Technology met or exceeded analysts’ expectations with $2.7 billion in revenue for its fiscal fourth quarter, largely driven by sales to cloud service providers. Seagate’s total revenue for fiscal 2016 was $11.2 billion, down 18.8% over last year’s $13.8 billion. Net income for the year was $248 million.

Both Seagate and Western Digital have been trying to diversify beyond their HDD businesses. WD last year acquired flash vendor SanDisk for $19 billion and object storage vendor Amplidata. Other past acquisitions include HDD competitor HGST, SSD maker sTec, all-flash array startup Skyera, PCI-flash vendor Virident Systems and flash-cache specialist VeloBit.

Seagate’s string of acquisitions includes Dot Hill Systems for $600 million last year, Avago’s LSI flash business in 2014 for $450 million and high-performance computing storage specialist Xyratex in 2013 for $374 million. Seagate sold off its EVault data protection business late last year to Carbonite for a mere $14 million in cash.

Luczo said Seagate completed the integration of Dot Hill and plans to launch converged storage products, including hybrid and all-flash arrays, later this year. He also noted that 12 TB helium near-line enterprise test units would be available this quarter for customer evaluation. Luczo said Seagate would refresh most of its high-volume capacity points over the next several quarters.

But Luczo cautioned that the growth rate for storage in the near term would likely fluctuate from quarter to quarter. He said the influence of the cloud service providers could be tricky to predict.

Near-line enterprise hard disk drives (HDDs) were hotter last quarter than Seagate anticipated they would be. Luczo said Seagate’s 8 TB enterprise HDD was the leading revenue SKU, as overall enterprise HDD revenue increased to 45% of total HDD sales. PC client shipments accounted for 25% of total HDD revenue.

Seagate said that although unit shipments of its HDDs have dropped 15% over the past five fiscal years, exabyte shipments have increased 112% and average capacity per drive has soared 133%. Luczo attributed the trends to the shift from client-server to mobile cloud architectures. He said most of the exabyte-scale growth relates to high-definition streaming content “where massive data ingest and sequential write operations” are critical.

Western Digital CEO Steve Milligan last week cited a key near-term priority as the transition to 3D NAND flash. He also noted that the company completed the alignment of the product and technology roadmaps for legacy WD, HGST and SanDisk products and opened a new wafer manufacturing facility in Japan with Toshiba.

WD expects 3D NAND wafer capacity to approach 40% of total NAND capacity by the end of 2017, according to Cordano.

Milligan said WD has been scaling down HDD capacity on a brick-and-mortar and head-count basis to react to the decline in the HDD market. He said WD had taken out 20% of its facilities and 25% of its head count during the last two years. Milligan said WD plans further reductions of up to one-third.

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