HDD Sees Light in Hybrid Ultrabook

Hard disc drive (HDD) has a hard time competing with solid state drive (SSD) as a computer storage device, especially with the increasing popularity of tablets such as ipad and galaxy tab over notebook. Everyone is expecting the HDD industry to suffer permanently.

SSD, which is quiet, lighter, faster and has higher performance than HDD, has a major problem: expensive. SSD is priced more than 10x more expensive than HDD per GB. However, with the emergence of Ultrabook by Intel, HDD is expected to breath again.

Ultrabook will put traditional notebook into history. It is much lighter, thinner, faster with longer battery life. It has some crucial advantage over tablet in which in tablet there is no real keyboard and sometimes cannot perform this and cannot support that.

      Ultrabook: strongly pushed by Intel

Ultrabook which starts to hit the market in 2011, initially use mostly 128GB SSD. However, to increase the storage capacity to 500GB-1TB without increasing its cost much, a hybrid storage solution is introduced. In this hybrid of external cache SSD+HDD, a small capacity of cache SSD is incorporated with a large capacity of HDD to increase the overall storage capacity without affecting the speedy SSD performance much. Another technology called hybrid HDD is another different thing under development by Seagate in which the cache SSD is incorporated internally into a HDD.

Some analysts predict that ultrabook with hybrid storage will explode into the market in year 2012. Thus, hybrid storage and HDD demand will get a major boost as well. 

        Figures for HDD in Ultrabook ONLY

      Ultrabook share in notebook

       
     Notebook share in overall mobile PC

Personally I don't fancy things like ipad, galaxy tab, iphone etc. I don't even own any of those gadgets. I don't think ultrabook will be as popular as the ipad. However, ultrabook will certainly make more people to reconsider the forgotten "notebook". If the forecast of ultrabook demand is right, then HDD industry will surely make its comeback strongly, starting from year 2012.

HDD Players Head-to-Head

Eng, JCY and Notion all have released their latest financial results this month. Lets see all of them in a glance.

Rev (Profit) RM mil	Current quarter	QoQ	YoY
Eng	133 (5.6)	120 (4.8)	135 (12.6)
JCY	395 (-31.8)	397 (12.4)	481 (55.6)
Notion	61 (10.1)	54 (10.8)	61 (2.9)

Obviously JCY is the worst performer. Eng and Notion are able to hang on with their revenue. Even though Notion get the least revenue, but its profit margin is quite impressive with the greatest net profit.

Eng has the smallest amount of outstanding shares (122.5 mil), followed closely by Notion but JCY has almost 16x more. For FY2010, EPS of Eng is the greatest with 40sen with Notion 25sen and JCY 8.6sen. However, this is going to change in the current FY11 in which we will see Notion top the rank. Eng may be then be privatized if the takeover is successful.

Notion is Coming...?

Notion VTec announced on 1st Aug 2011 that the negotiation with various parties to acquire its business/equity interest are still on-going. The Edge online put Notion as a stock to watch on 2nd Aug, but only a mere 131,000 shares changed hands. Notion's share price down 2sen to RM2.02. Seems like no one is interested.

Earlier in April this year, Notion did announce that it is in talk with certain parties for its stake. It was believed that a US base private equity firm is eyeing its shares or Nikon may consider to up its stake. However, nothing materialized and Notion finally announced in 1st July 2011 that the negotiation has been terminated due to disagreement in certain terms and conditions.

After exactly one month, Notion announces that the talk is re-ignited, not sure with the same parties or not. Almost on the same time, Notion's largest shareholder Choo Wing Hong who has 13.27% of Notion's shares, disposed 431,000 shares and 256,000 warrants. Is there anything to do with the equity interest talk? I don't know, but the amount of shares is quite small. I can't remember when is the last time Notion's major shareholders dispose their shares.

Last month TYK Capital has offered to acquire the entire business and privatize Eng Teknologi, also a HDD player. With the survival of PCs in doubt, HDD players share price have been vastly under-rated, which provides a good opportunity for merger or acquisition.

Is Notion a good short term buy or even long term investment? The industry is risky but the management seems good. 

Anyway, the dead line for Eng takeover offer is 5th Aug 5pm. Let's see how it goes.