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Seagate sees 10 TB drives as sweet spot

While much of the storage world is talking up NVM Express and other flash technologies, Seagate is pushing ahead with shingled magnetic recording, heat-assisted magnetic recording and large capacity HDDs.

Reliance on HDDs seems short-sighted these days, but Seagate executives point to rapid data growth and take a less optimistic view of the solid-state market (SSD) than competitors. They see a significant market forming around 10 TB drives, and larger HDDs right around the corner.

With HDDs making up more than 90% of its revenue, Seagate this week reported $2.67 billion in revenue last quarter — up 3% from last year, but lower than its forecast of $2.7 billion. Seagate posted $194 million in income for the quarter.

CEO Steve Luczo said there is plenty of life left in the HDD business, with nearline Helium 10 TB drives now popular and larger capacity Helium HDDs coming soon.

While HDD shipments totaled 65.5 exabytes — up 18% year-over-year — and average capacity drive of 1.8 TB increased 27% from last year, revenue growth did not come close to capacity growth.

Luczo cited expected double-digit growth in exabyte demand this year, but in the same breadth said it represented “modest revenue growth opportunities for Seagate.”

Luczo does see more potential in nearline drives for infrequently accessed data. Seagate Nearline revenue increased 20% year-over-year last quarter. He said growth of more than 30% for the year is possible “as you see the 10 TB drives and 12 TB drives start to ramp. … I think the combination of stronger demand signals for the second half plus the rotation of the portfolio that’s going to have 8 TB, 10 TB and 12 TB drives … you’re going to see exabyte growth there that’s going to continue.”

Helium expanding from 10 TB drives to 12 TB soon

Seagate is shipping 12 TB Helium drives to cloud providers and expects volume shipments to begin by June. Luczo said drive capacities will expand to 16 TB, 20 TB and 32 TB within a few years.

“We believe our opportunities in the nearline market will continue to span across multiple capacity points as our customers evolve their capacity infrastructure for a growing multiple of enterprise workload applications,” Luczo said.

Luczo said Seagate has sold more than 35 million shingled magnetic recording (SMR) drives, and is refreshing its SMR portfolio with fourth-generation technology. He said next-generation heat-assisted magnetic recording drives are planned for late 2018.

Even with the focus on HDDs, Seagate is not immune to NAND and DRAM shortages. Luczo said the shortages could hurt Seagate products, including its storage systems, because of an impact in server and cloud markets. That is one reason Seagate forecast a slight drop in revenue this quarter, to between $2.5 billion to $2.6 billion. On the other hand, NAND shortages could help HDD sales.

“I think from a Seagate perspective, we feel that the shortage overall might marginally help us on the client space as we move through the calendar year and maybe even to the beginning of next year,” he said. “I think where it’s more problematic for the industry in general, is if it’s constraining build-outs at all at the CSP (cloud service provider) space, with the DRAM shortages. And we have seen indications of certain deployments being delayed because they basically can’t get all the component technology that they need across the board. We experience that a little bit in our own [storage systems] business, where we obviously need to get flash to sell our flash drives.

“I don’t know that it’s as easy to say that it’s good or bad,” Luczo said. “I think there’s some good to it and there’s some pressures from it. We’ve always said it’s a better world if there’s a lot of NAND, because that means people have more devices in their hand and they’re creating more data. And that’s still our thesis.”

Seagate’s storage systems revenue of $250 million was up from $242 million the previous quarter. Seagate’s storage systems come from acquisitions of Xyratex and Dot Hill Systems, are sold mostly through OEM partners and include flash storage.

“We expect to see year-over-year growth going forward,” said Phil Brace, president of Seagate’s cloud systems and silicon group. “OEMs are making opportunities available for Seagate to come in and work with them on higher levels of integration.”

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