Shares of Lake Forest’s Western Digital Corp., a maker of disk drives, closed higher Tuesday on reports that drives for desktop computers appear to be in short supply, potentially adding to the company’s bottom line.
The company’s stock closed up nearly 3% on a market value of $11 billion.
A report on financial news Web site TheStreet.com cited a “widespread shortage of 3.5-inch hard drives that are used primarily in desktop PCs.”
Demand for PC’s fared better than expected during the fourth quarter, the report said.
Scotts Valley-based Seagate Technology LLC is the top supplier of drives for desktops, followed by Western Digital.
Even so, Seagate’s shares closed down slightly Tuesday.
About half of Western Digital’s business is making smaller, slimmer disk drives for laptops and other portable consumer electronics—a business that sees more growth and profits than commodity-type drives for desktop computers.
Western Digital surpassed Seagate last year as the top supplier of drives for laptops, referred to as 2.5-inch drives.
Together, the two companies have 80% of the disk drive market overall.
A shortage of drives is good for both Western Digital and Seagate, because it bolsters prices for drives and adds to profits.
“The shortage of desktop hard drives may persist into the middle of 2010 and result in price increases,” the report said.
The same phenomenon could hold true for Fountain Valley’s Kingston Technology Co., the biggest maker of memory products for computers with nearly more than 30% of the market.
Kingston’s raw materials are dynamic random access memory chips, also called DRAM, and flash memory chips, which are manufactured primarily in Asia.
The privately held company assembles chips onto specialized circuit boards and sells them to PC makers as memory modules. Flash chips make their way into storage cards for phones, cameras and other devices.
Both types of memory chips are seen as running in short supply due to increased demand, according to the report.
