By Alex Dobuzinskis
LOS ANGELES | Tue Oct 5, 2010 3:47am EDT
LOS ANGELES (Reuters) - Hard drive makers like Seagate Technology and Western Digital Corp could experience slower growth as more and more consumers swap PCs for tablets, but they shouldn't be counted out.
With Apple's iPad and tablets from a host of others -- from Hewlett-Packard to Research in Motion -- poised to take market share from PCs in coming months, Seagate and others are scrambling to adapt to a future where fewer consumers will tote laptops, and tablets use flash memory instead of hard drives.
Still all is not negative for hard drive makers: Unit sales are expected to rise nearly 17 this year, many tablet users may want a level of data storage that only hard drives can provide and a slimmed-down hard drive industry has become increasingly
adept at managing inventory.
Kaushik Roy, an analyst with Wedbush Securities, said the threat from tablets is very real and that it has started to be priced into hard drive stocks in the past two months.
"We don't think all of it is priced in," Roy said. "People haven't really realized the extent or the depth of the situation."
"You've got to believe that some people who would have bought a laptop before are now going to move to the tablet."
Last week, Research In Motion Ltd said it plans to release a tablet called the PlayBook in early 2011, the latest addition to an already crowded field dominated by Apple's 3 million-plus selling iPad.
Tablet sales are likely top 15 million units this year and balloon to more than 48 million units in 2011, said research firm iSuppli. It said 18 percent of netbook shipments are at risk of being lost this year.
The strength of the tablet market could cause a 2 percent to 3 percent loss to global hard drive shipments in 2010, according to research firm IDC.
Roy estimates that sales of tablets could shave 10 cents to 12 cents off the $2.11 per share that analysts on average expect Seagate to earn in calendar 2011, and trim 20 cents to 25 cents from the $3.95 per share Western Digital is expected to earn.
Unlike netbooks and notebooks, which generally use hard drives for storage, tablets use flash storage manufactured by companies.
Flash is considered more rugged and faster than hard drive technology, which manufacturers view as an advantage for tablets, which need fast boot times and can easily be dropped.
IDC still expects total hard drive shipments to rise 16.7 percent to 650 million units this year, because of heightened need for storage for everything from security videos to business data. But next year, amid an overall increase in hard drive shipments, tablets could cause a 3.8 percent drag on shipment growth, said Fang Zhang, an analyst for iSuppli.*We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language or appear to be spam and review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters.