Irvine-based drive maker Western Digital Corp. was among a handful of data storage providers recently downgraded by Standard & Poor’s Financial Services LLC on slumping revenue outlooks compared to last year’s growth.
S&P analyst Jim Yin cut his rating on Western Digital from “sell” to “hold,” citing weak sales to enterprise customers and slowing PC sales for consumers.
“Because these companies have been building up their inventories of disk drives in anticipation of strong back-to-school sales, we project excess inventory in the first half of 2012,” Yin said.
The caution flag sent Western Digital shares down more than 8%.
The company had a recent market value of $6.1 billion.
Yin also downgraded Scotts Valley-based Western Digital rival Seagate Technologies LLC, NetApp Inc. of Sunnyvale and Massachusetts-based EMC Corp.
The downgrades didn’t come as much of a surprise because data storage providers rely on the consumer market for the bulk of their revenue, and the growth of tablets have cut into those sales.
The market is expected to see $28.1 billion in global sales in 2011, up 4% from 2010, when growth topped 7%, according to El Segundo-based market researcher iSuppli Corp., a unit of Colorado-based IHS Inc.
ISuppli projects revenue growth to dip in three of the next four years as tablet sales rise and competition increases from flash drives and solid state drives.
More efficient cloud storage and lower-priced drives are also expected to cut into sales, the report said.
In other Western Digital news, the company recently said it received an antitrust complaint from the European Union over its pending $4.3 billion acquisition of Hitachi Global Storage Technologies.
The objections rest on “its potential effects on competition,” according to an Aug. 19 regulatory filing with the Securities and Exchange Commission.
The deal, expected to close in the fourth quarter, is set to make Western Digital the undisputed leader in drives. It would also increase its corporate business.
The company now leads by number of drives shipped but is second in revenue to Seagate, which sells more corporate drives.
The move prompted Seagate in April to offer $1.4 billion for Samsung Electronics Co.’s disk drive business.
The buy would give Seagate added market share and access to Samsung flash memory chips used in new solid state drives that use chips instead of spinning disks to store data.
If both deals are approved, it would trim the big players in the drive market from five to three, with Tokyo-based Toshiba Corp. being the other.
Blytheco Recognized
Laguna Hills-based reseller Blytheco LLC was recently recognized as Sage Software Inc.’s business partner of the year for 2010.
Blytheco has been a leading seller for the Irvine-based software maker since its inception 31 years ago.
The announcement was made in late July during Sage’s annual conference and trade show in Maryland.
Sage is the North American unit of Britain-based Sage Group PLC.
It is the second-largest software company by sales in Orange County, behind Irvine-based game maker Blizzard Entertainment Inc.
The designation highlighted a banner year at Blytheco in 2010 as the company saw record sales amid a recovery in technology spending.
“We saw a significant amount of growth,” said Chief Executive Stephen Blythe.
The company, which can be viewed as a leading indicator of technology spending, recorded sales of nearly $22.5 million in 2010, up 15% from a year earlier.
Sales have flattened since a strong first quarter, according to Blythe.
He said the lull came as a cautious sentiment swept over businesses earlier this year and has held fast, thanks in part to the volatile stock market, concerns over a double-dip recession and continued woes in the housing market.
“That just created an uneasiness,” Blythe said.
The company employs 40 here and 115 altogether, with the rest spread over eight other offices around the country.
Wireless Takes Lead
Small businesses are projected to spend more on wireless telecommunication services in 2012 than any other mode, according to Scottsdale, Ariz.-based In-Stat, part of NPD Group Inc.
It’s the first year wireless communication is estimated to beat sales from landlines, cloud computing and other telecommunication spending.
That’s good news for local chipmakers and wireless data providers.
The retail, hospitality and food industries are leading the way. They’re expected to combine to spend $11.5 billion on wireless communication in 2010.
In-Stat projects a continuing decline on traditional landline telephone service, with a drop of more than $1 billion, or 15%, from 2010 to 2015.
Spending on cloud computing is forecasted to jump 190% from 2010 to 2015.
