Portability, Cloud Services Lift SanDisk's Outlook

By Trefis 06/27/11 - 11:07 AM EDT

• http://www.thestreet.com/_yahoo/story/11166482/1/portability-cloud-services-lift-sandisks-outlook.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- Apple (AAPL_) recently announced the launch of its iCloud storage service at its Worldwide Developers Conference 2011. As a master at getting buzz behind new product launches, Apple put its weight behind one of the hottest themes in the computer industry with cloud computing. If Apple gains traction with the iCloud, we will likely see similar offerings from other players in the smartphones and PC market like Google(GOOG_), Microsoft(MSFT_), Hewlett Packard(HPQ_), Nokia(NOK_), Research in Motion (RIMM_) and Motorola Mobility (MMI_) among others. Below we look at how this move could impact NAND-based flash storage and SanDisk (SNDK_) in particular.

We currently have a $50.60 Trefis price estimate for SanDisk, the third-largest player in NAND industry, which is about 15% above the stock's market price.

The demand for high-quality media consumption on the move is likely to get a serious boost as a result of the iCloud and other competing services (already present or likely to follow). This will indeed increase the demand for some basic minimum local storage -- for instant access when not connected to the Web.

While the shift to the cloud will likely hurt hard-disk-drive sales as users store less data on hard drives locally, SanDisk's storage hardware will benefit as NAND-based flash is used primarily in smartphones and media tablets, which tend to rely heavily on cloudstorage. The cloud shift will also hasten adoption of solid state drives (which use NAND-based flash) in PCs as speed and portability requirements replace sheer volume as the top priority among consumers.

Also while cloudservices may seem to reduce the average flash storage capacity per user as consumers store less media locally, the rapidly increasing file sizes (3D Videos, large sized image files etc.) are likely to counter any impact this is likely to have on local flash storage capacities.

The company expects NAND flash consumption to increase 10 times by 2014 primarily driven by smartphones and tablets.

We will update the SanDisk model to better reflect the impact of SSDs on the firm's stock price. Meanwhile you can see our complete analysis for SanDisk.

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