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The Hardware Storage Industry Is Consolidating

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Industry outlook

The hardware storage industry is going through a consolidation phase. Currently, firms aren’t able to keep up with the need to constantly improve efficiency in manufacturing. Also, they aren’t able to meet the rising capital expenditure needs for research and development to keep up with current trends like the shift to SSD. Seagate Technology (STX) acquired Samsung Electronics’ HDD (hard disk drive) business in December 2011. Western Digital acquired Viviti Technologies in March 2012.

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In order to enhance the firm’s flash portfolio, Western Digital (WDC) later acquired Virident, Velobit, and sTec in 2013. SanDisk (SNDK) also acquired PCLE storage maker Fusion-io in 2014. Seagate acquired Avago-owned LSI in the same sector on May 29, 2015. As seen in the below chart, shares of STX rose by 7.72% one month after the acquisition.

Analysts expect the consolidation in this sector to continue. Larger firms will explore opportunities to purchase small players and niche players in order to gain market share and access to research in areas that include SSD technology and high speed flash storage.

Seagate Technology constitutes 29.93% of Alken Asset Management portfolio

As per the latest 13F filings of hedge funds for the quarter ending June 30, 2015, Seagate constitutes 29.93% of Alken Asset Management’s overall portfolio in comparison to 27.13% in 1Q15. STX also constitutes 8.67%, 2.57%, and 2.55% of Trinity Street Asset Management, Alliance Trust, and Hamlin Capital Management, respectively.

As per 13F filings of 196 hedge funds, 22 have started new positions while 16 have exited positions in Seagate. 65 hedge funds have increased positions in the firm while 54 have reduced positions.

Seagate makes up 0.09% of the SPDR S&P 500 ETF Trust (SPY) and 0.39% of the Technology Select Sector SPDR Fund ETF (XLK).

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