Is Your Portfolio in Solid State?

A little healthy competition could do wonders for the solid state drive segment.

When Pilant Technology announced its entry to the solid-state hard drive (SSD) market, some analysts turned bearish on STEC (STEC), citing the new competition, according to The Wall Street Journal. Manouch Moshayedi, STEC’s CEO told The Journal he wasn’t worried. “It’s perfectly inevitable that people will have second or third qualified vendors in this market,” he explained. “We never expected to be a single source in this market forever.” So far shareholders haven’t echoed this sentiment, sending the stock lower by more than -25% in the last two weeks.

J.P. Morgan initiated coverage on STEC with an Overweight ranking earlier this month, while the stock was trading at near all-time highs. Now that negative sentiment has discounted shares, B. Riley upgraded the stock today to Buy from Neutral.

Of the Data Storage Stocks Index’s 14 components, STEC is the only loser over the last month. More than half the sector’s U.S.-listed stocks are up double-digits for the period, led by more than 30% jumps at U.K.-based data storage and communication network firm Xyratex (XRTX) and Hutchinson Technology (HTCH), which specializes in suspension assemblies for disk drives.

A number of popular names are involved in the development and manufacture of SSDs in one way or another. Intel (INTC), SanDisk (SNDK), and Micron Technology (MU) are not direct threats to STEC yet, but as the segment grows, more and more companies will be fighting for their piece of the pie. Moshayedi told The Journal he expects the SSD enterprise market to be worth between $4 billion and $5 billion in the next five years.

Apple (AAPL) already uses SSD technology in its paper-thin MacBook Air and Hewlett Packard (HPQ) recently announced an SSD option for its ProLiant G5 and G6 servers. Sun Microsystems (JAVA) and IBM (IBM) began offering SSDs in their servers earlier this year, according to PCWorld. Samsung’s VP for memory marketing said, “Using SSDs as the primary storage medium in enterprise servers will provide optimal value for data centers, with their exceptional low-power attributes, long-term reliability and outstanding performance,” in a statement.

As the segment develops, investors can track trends and formulate investment theses with the Data Storage Stocks Index and tickerspy’s suite of research tools and metrics.

Tags: AAPL, HPQ, HTCH, IBM, INTC, JAVA, MU, SNDK, STEC, XRTX