Considering the moves to cloud computing, virtualization and the regular onslaught of information that gets pumped over the Internet by the second, it’s not hard to understand the growing need for data storage. Hence the headline in the recent NY Times Bits blog: “Data Explosion Lifts the Storage Market” (http://bits.blogs.nytimes.com/2011/09/09/data-explosion-lifts-the-storage-market/?scp=1&sq=emc%20howard%20elias&st=Search).
The article notes that sales of disk storage systems rose more than 10 percent in the second quarter, to $7.5 billion, according to International Data Corporation (IDC) reports. And it adds that the storage boom is an indicator that technology is working the way it should: “you get more for less.”
According to Bits, the most rapid growth is in the more technologically sophisticated storage systems “that can quickly shuttle data back and forth.” Virtualization software also requires “more capacity and more high-performing storage” so the demand just keeps on growing.
Predictably in big pubs like the NYT, the two big storage specialists, EMC and NetApp, grab the highlights and perhaps rightfully so since they are grabbing market share. But there are several small cap stocks toiling in the memory/storage arena that feed products into the datacenter industry that might benefit from the rapidly expanding growth in this sector.
Salt Lake City-based Fusion-io Inc. (NYSE: FIO, http://www.fusionio.com/) develops and sells storage memory platforms for data decentralization. The company’s platform enhances the processing capabilities within a datacenter by relocating process-critical or active data from centralized storage to the server where it is being processed. Despite signing up huge customers like Apple and Facebook in recent months, Auriga Securities analyst Kevin Hunt took the rare step earlier this month of initiating coverage with a Sell rating and a $16 price target (http://blogs.barrons.com/techtraderdaily/2011/09/07/fusion-io-slips-auriga-starts-at-sell-16-target/?mod=yahoobarrons) because he believes the stock is too expensive and cash flows don’t justify its current price, according to Barrons. FIO stock closed Sept. 14 at $20.40, down 48 cents on the day.
Santa Clara, CA-based Inphi Corporation (NYSE: IPHI, http://www.inphi.com/), among other things, creates high-speed analog semiconductor solutions for the communications and computing markets, including an interface between analog signals and digital information in high-performance systems such as data center servers. It was formerly known as TCom Communications. CEO Young Sohn formerly worked at Intel and is the former President of Agilent Technology’s semiconductor group, now known as Avago Technologies. IPHI stock sold for about $27 in February, but has been falling (like many small caps) throughout the summer. It closed at $9.69, up 24 cents, Sept. 14.
Irvine, CA-based Netlist Inc.* (Nasdaq: NLST, http://www.netlist.com/) designs, manufactures and sells intelligent memory subsystems for the datacenter server, high-performance computing and communications markets. One of its products, called HyperCloud Memory module, was designed to improve server utilization by improving performance in memory-intensive applications such as high-performance computer simulations, virtualization, and cloud computing applications. NLST announced Sept. 13 that HyperCloud has been qualified on GIGABYTE’s high density server motherboard. NLST stock closed Sept. 14 at $1.60, up 6 cents. Last October it traded for nearly $4.
* Denotes a client of Allen & Caron Inc., publisher of this blog.