Thursday, January 7, 2010

Top storage stock picks (and Super Bowl predictions) for 2010

January 8, 2010 – No, I’m not going to give you my top stock picks for this year. Given my history in the stock market, that would be cruel. Not to mention journalistically unethical.

But in addition to Top Ten technologies/stories/predictions lists from virtually every editor/analyst/vendor, I recently perused the top storage stock picks from some financial analyst firms, particularly those that seem to me to be savvy about storage.

In their first report of the new year, the analysts at Needham & Company focused mostly on the HDD and SSD sectors, citing top 2010 stock picks of Seagate, Western Digital, Intevac, Hewlett-Packard and STEC.

I’d agree that 2010 will be a banner year for the traditional HDD vendors (a rare occurrence indeed), in large part because of the anticipated IT refreshes in servers and PCs.

The SSD space could be more dicey, in my opinion. Most analysts and storage editors (including me) put SSDs on their Top Five Technologies of 2009 lists, despite the fact that actual shipments remained miniscule throughout the year. And STEC has been a favorite among stock analysts for some time, in large part because the company has design wins with most of the leading disk array vendors.

But the SSD sector is getting very crowded, very quickly, and unit shipments won’t support the number of players. Expect some consolidation and dropouts in the SSD space.

Summing up the SSD section of their report (which they labeled “Fear and Loathing in SSD Land”) Needham analysts stated that “We believe 2010 will see the rising of the true enterprise SSD players Pliant, Seagate, Hitachi GST/Intel, Fusion-io and visibility into Western Digital as validation for the space and STEC’s pole position at the table.” (What is it with financial analysts and the word ‘visibility’?)

Canaccord Adams analyst Paul Mansky took a broader look at the storage market, and all other IT sectors, in his recent 2010 Technology Outlook report. And his top storage stock pick for this year is

[drum roll]

Emulex. According to Mansky, vendors “that appear to have room at both the revenue and margin lines include our top pick Emulex, as well as QLogic, Double-Take and Juniper. Cisco, EMC and NetApp appear to leave at least some room for one or both.”

Canaccord Adams analysts also note that, with the loosening of the IT purse strings this year, higher-end enterprise storage vendors may fare well, citing EMC, NetApp, Emulex, QLogic, Brocade and 3PAR.

Although Cannaccord Adams analysts didn’t specifically cite FCoE as a reason for singling out Emulex and QLogic, I think that any bet on that duo would in fact be a bet on good fortunes for FCoE this year.

As I’ve opined before, though, I think FCoE will take off slower than expected. And the FCoE market is going to get uncomfortably (for Emulex and QLogic) crowded this year as heavyweights such as Broadcom and Intel (and a handful of smaller, 10GbE specialists) ramp up. So any bets on Emulex and QLogic should be based on good old financial fundamentals, not FCoE.

And now for some more interesting – and perhaps lucrative – picks.

You heard it hear first: Colts and Cowboys in the Super Bowl, with Indy winning in a boring blowout (after the real Super Bowl – Colts vs. Chargers, a guaranteed barn burner in which Manning wins it with seconds on the clock).

But first, the Wes Welker-less Wildcard Weekend. My picks:

Jets jettison the (too colorfully clad) Bengals
Cowboys (home field, or Taj Mahal, advantage) ground the Eagles
Patriots over the Ravens (and quit whining about Wes Welker and Brady’s ribs, New Englanders)
Packers over the Cardinals (because we must – must – have a Packers-Vikings matchup in the playoffs)


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