Standard Poors

Please see General Disclaimers on the last page of this report.
Current Environment ............................................................................................ 1

Industry Profile ...................................................................................................... 9
Industry Trends ................................................................................................... 12
How the Industry Operates ............................................................................... 19
Key Industry Ratios and Statistics ................................................................... 26
How to Analyze a Technology Hardware Company ..................................... 28
Glossary ................................................................................................................ 33
Industry References ........................................................................................... 37
Comparative Company Analysis ...................................................................... 38
This issue updates the issues dated October 2013.
The next update of this combined Survey is scheduled for October 2014.

Industry Surveys
Computers: Hardware
Angelo Zino, CFA, Information Technology Sector Equity Analyst

APRIL 2014
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INDUSTRY SURVEYS COMPUTERS: HARDWARE / APRIL 2014 1
CURRENT ENVIRONMENT
Mobility to drive hardware, as personal computer spending contracts
S&P Capital IQ Equity Research anticipates a mixed global information technology (IT) spending
environment in the near term due to a number of factors, including ongoing declines in personal computer
(PC) spending, uneven software spending, a maturing smartphone market, tablets cannibalizing PCs, and
the evolution of the cloud cannibalizing software.
We forecast a sluggish IT spending landscape in 2014, as enterprises are hesitating and delaying some
projects due to political and economic uncertainty. Softer corporate profits this year could drive more
customers towards cost-saving solutions, which we think will lead to greater adoption of the cloud.
According to IT research firm IDCs first-quarter 2014 estimates, worldwide IT spending increased by 4%
in 2013, following growth of 5.6% in 2012, 5.9% in 2011, and 7.9% in 2010. The growth rate is expected
to improve to 4.6% in 2014. Going forward, we expect enterprise software, telecom services, mobility
devices, and data centers to witness healthy growth rates due to improving business confidence in developed
economies, which can be seen through software upgrades in big data, cloud, and mobile technologies.
While PC spending will continue to decline, in our view, improved mobility spending will drive growth in
hardware. In retrospect, Windows 8 failed to drive a PC rebound as low-cost tablets continue to cannibalize
in spending terms. According to IDC (November 2013), worldwide device shipments (PCs and tablets)
totaled 536 million in 2013, 58% of which were PCs. The PC share is seen declining to 52% in 2014 and to
45% by 2017. While tablet shipments are projected to grow at a 15% compound annual growth rate
(CAGR) between 2013 and 2017, PC shipments will see a 1.5% compound annual decline between 2013
and 2018.
By value, worldwide device shipments (PCs and tablets) will grow from $280 billion in 2013 to $301 billion
by 2017, implying a 1.8% CAGR. The share of PC value in the total device value shipped is expected to
drop from 71% in 2013 to 60% by 2017. The value of PC shipments could decline from $201 billion in
2013 to $179 billion in 2017, implying a compound annual decline of 2.8%. The value of tablet shipments
could increase from $79 billion in 2013 to $123 billion in 2017, implying a 12% CAGR. This suggests that
the average selling price of PCs could
drop at a slower rate (2% compound
annual decline) than that of tablets (3%)
between 2013 and 2017. In addition, IDC
predicts mobile phone shipments to grow
at a 4% CAGR from 1.8 billion in 2013
to 2.2 billion in 2018, whereas
smartphone shipments will grow at an
11.5% CAGR from 1.2 billion in 2014 to
1.7 billion in 2018.
PC market in the midst of a secular
decline
According to IDC (March 2014),
worldwide PC shipments will decline
about 6% in 2014, following a 9.8%
decline in 2013, due to a lack of
innovation in the PC segment, as well as
rising competition from other devices.
Emerging markets, which account for a
majority of PC shipments, are being
affected by an uncertain economic
Chart 1:
WORLDWIDE PC
SHIPMENTS,
REVENUES AND
GROWTH RATES
-15
-10
-5
0
5
10
15
100
150
200
250
300
350
400
2010 2011 2012 2013 2014 2015 2016 2017
Shipments (millions of units, left scale)
Revenue (billion dollars, left scale)
Revenue growth (percent, right scale)
WORLDWIDE PC SHIPMENTS, REVENUES
AND GROWTH RATES
Source: IDC's November 2013 forecast report.

2 COMPUTERS: HARDWARE / APRIL 2014 INDUSTRY SURVEYS
environment and technological changes. Ultrabooks and mini notebooks failed to lift the PC market, hurt
by high pricing points and intense competition from mobility devices. For example, the huge success of the
iPad mini has cannibalized Apples own MacBooks, causing Apples underperformance in the PC space.
We think the PC industry is struggling to identify innovations that differentiate PCs from other products
and inspire consumers to buy. Although stylish and trendy ultrabooks have the potential to revive
consumers interest in portable PCs, they still suffer from too high of a price point. We think the availability
of touch glass on a device is highly significant in the new-generation consumer PCs, as Windows 8 operating
systems are designed and optimized for touch. Therefore, without touch, the usability of new PCs is severely
compromised. We believe that consumers today prefer purchasing lower-cost touch-based tablets and other
mobility devices that meet most of their day-to-day needs, thus creating a secular decline in traditional PCs.
While we expect ultrabook prices to come down sharply in the coming quarters, we remain cautious on
whether price points will be attractive enough to stimulate consumer demand. We think the enterprise
segment will hold up better than the consumer segment, driven by ongoing corporate refreshes in emerging
markets and greater adoption of Windows 7/Windows 8 ahead of the expiration of support for the widely
used Microsoft Windows XP version in April 2014.
For 2014, IDC predicts PC shipment declines in every region of the world: 1.9% in the US, 4.3% in
Western Europe, 3.9% in Asia Pacific, 7.1% in Japan, and 4.3% in the rest of the world (ROW). Between
2013 and 2018, it expects global PC shipments to decline overall by 1.5%, compounded annually. It
expects annual declines between 2013 and 2017 of 2% in the US, 2.6% in Western Europe, 2.2% in Japan,
and 0.5% for ROW, but annual growth of 0.8% in Asia Pacific.
Desktop PC sales could decline faster than that of portable PCs. According to IDC, between 2013 and
2017, shipments of desktop PCs will witness a 2.8% compound annual decline while portables will witness
growth of 0.7%. IDC predicts desktop PCs to decline 4.3% in 2014 to 130 million units and portables to
decline 3.4% to 172 million. This could lead to a change in the ratio of desktop/portables from 43%/57%
in 2013 to 40%/60% in 2017. The decline in desktop PCs is largely attributable to a change in consumers
preferences toward touch-based and sleeker products. We expect commercial and gaming segments to
absorb most of the desktop purchases going forward. The portables are expected to level out with the
stabilization in mini notebooks and moderate growth in ultraslim PCs. Although Windows 8compatible
touch-based innovative ultraslim PCs could arouse consumers interest, the higher price point, competition
from tablets, and component constraints could act as major hurdles in their widespread adoption.
Smartphones and tablets to rule the
hardware space
According to IDC, worldwide tablet
shipments will grow from 221 million
units in 2013 to 386 million units by
2017, translating to a 15% CAGR during
that period. By value, tablet shipments will
grow at an 11.5% CAGR from $79.4
billion in 2013 to $123 billion in 2017.
Worldwide smartphone shipments will
grow at a CAGR of 11.5% by value
between 2014 and 2018, while worldwide
mobile phone shipments will grow at a
4% CAGR by value between 2013 and
2018.
There has been a shift in favor of sub-
eight-inch screen size within the tablet
arena, driven by lower prices, ability to
run smartphone apps and better
portability. We think several early
Chart 2: WORLDWIDE
TABLET SHIPMENTS
AND GROWTH
RATES
0
10
20
30
40
50
60
70
80
90
0
50
100
150
200
250
300
350
400
450
2011 2012 2013 2014 2015 2016 2017
Shipments (millions of units, left scale)
Year-to-year growth (percent, right scale)
WORLDWIDE TABLET SHIPMENTS AND GROWTH RATES

adopters of 10-inch tablets are now shifting towards smaller-screen tablets. Several manufacturers are also
introducing tablets at under $100, which is attracting new customers to the tablet space. However, low-
priced tablets are expected to have a shorter lifespan, leading to increased replacement cycles. As the market
matures, this could lead to multiple
tablets per person.
There has also been an increasing
use of tablets in the commercial
and enterprise arena. According to
IDC, the ratio of
consumer/commercial will shift
from 88%/12% in 2013 to
78%/22% by 2017. We expect
Android to remain the mainstream
operating system for tablets,
followed by the Apple iOS. The
share of Windows and Windows
RT is expected to increase steadily
over the years. The major vendors
like Samsung and ASUStek
Computer Inc. will contribute to
growth in the Android market.
According to IDC projections,
shipments of devices with a sub-
eight-inch screen size will grow at a
15% CAGR between 2013 and
2017, while those with an above-
eight-inch screen size will grow at a
14.7% CAGR. As per IDC, Apple
accounted for 34.4% of global
tablet shipments in the third
quarter of 2013; Samsung, 18.7%;
ASUStek, 5.8%; Lenovo 3,2%;
Amazon, 2.8%; and others, 35.1%.
We think competition is
intensifying among first-tier tablet
vendors to release new products. In
July 2013, Google launched its
second-generation Nexus 7 in the
US. In September, Apple launched
its next-generation 5S iPhone as
well as a more affordable low-end
5C iPhone. In October, Apple
announced the release of its fifth-
generation iPad Air tablet and next-
generation iWork and iLife apps
that are available with every Mac
and iOS device. In January 2014,
Samsung launched Galaxy Tab3
Lite to strengthen its share of the
tablet market and, in February, the
company introduced its fifth-
generation Galaxy S5.
Chart 3:
WORLDWIDE
TABLET SHIPMENT
DISTRIBUTION BY
OPERATING SYSTEM
Chart 4:
WORLDWIDE
MOBILE PHONE
SHIPMENTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 2017
Android iOS Others*
WORLDWIDE TABLET SHIPMENT DISTRIBUTION BY
OPERATING SYSTEM
*Includes Blackberry, Windows, Windows RT, and others.
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016 2017
Non-smartphones Smartphones
WORLDWIDE MOBILE PHONE SHIPMENTS
(Millions of units)

According to IDC, the US accounted for 27% of global tablet shipments in 2013, followed by Western
Europe, 21%; Japan, 3%; Asia Pacific, 26%; and the rest of the world (ROW), 23%. Between 2013 and
2017, tablet shipments could grow at a CAGR of 10.5% in the US, 15.3% in Western Europe, 6% in Japan,
16.5% in Asia Pacific, and 18.5% in ROW.
Smartphones have been gradually replacing traditional mobile phones (non-smartphones) over the last few
years, and we expect this trend to persist. According to IDC, the ratio of non-smartphones to smartphones
could change from 45%/55% in 2013 to 25%/75% by 2017. This implies an annualized decline of 8.7% in
non-smartphones between 2013 and 2017 and annualized growth of 11.5% in smartphones between 2014
and 2018. Most mobile phone suppliers are turning their focus to smartphones, as demand is largely driven
by replacements by current users as well as first-time users. In addition, declining prices will make
smartphones affordable to the middle class, aiding faster penetration. The increased competition within
Android-based smartphones will force vendors to demonstrate innovation and product differentiation, and
reduce prices. This will contribute to an overall increase in demand for smartphones. IDC reported that
Samsung accounted for 31.3% of worldwide smartphone shipments in 2013; Apple, 15.2%; LG, 4.5%;
Huawei, 4.8%; Lenovo, 4.7%; and others, 39.5%.
By region, in 2013, North America accounted for 15% of global smartphone shipments; Latin America,
9%; Europe, the Middle East, and Africa (EMEA), 24%; and Asia Pacific, (APAC) 52%, according to IDC.
IDC predicts that by 2017, the geographic shipment distribution will shift to 11% North America, 9%
Latin America, 21% EMEA, and 59% APAC. This implies that between 2013 and 2017, smartphone
shipments will grow at a CAGR of 5.7% in North America, 14.1% in Latin America, 10.4% in EMEA, and
16.8% in APAC.
CHINA AND NON-DEVELOPED REGIONS THE KEY TO HARDWARE GROWTH
We think future demand for hardware devices will be driven by the likes of China, India, Brazil, and other
non-developed regions. The developed regions (the US, Japan, and Western Europe) are already showing
signs of maturity and high penetration rates. As per IDC estimates, these developed regions accounted for
48% of the $280 billion global device market (PCs and tablets) in 2013, while non-developed regions
(APAC and ROW) accounted for the balance. As non-developed regions are expected to grow faster than
developed regions, the
distribution of the global device
market between
developed/non-developed will
change to 46%/54% by 2017.
In addition, the global device
market is expected to increase
to $301 billion in 2017,
implying a CAGR of 1.8%.
Between 2012 and 2017,
developed markets are expected
to grow at a CAGR of 2%
while non-developed markets
could grow at a 5% CAGR. In
terms of shipments, IDCs
prediction implies that the ratio
of developed/non-developed
could change from 40%/60%
in 2013 to 37%/63% by 2017
for PCs, and from 51%/49% in
2013 to 46%/54% by 2017 for
tablets.
Table 5: WORLDWIDE
TABLET REVENUE BY
REGION
WORLDWIDE TABLET REVENUE BY REGION
2011 2012 2013 2014 2015 2016 2017
REVENUES (Billions of dollars)
United States 15.7 19.6 22.2 25.8 28.4 29.9 30.5
Western Europe 7.5 13.2 18.7 22.0 26.6 30.7 33.9
Japan 1.6 2.5 3.7 4.8 5.0 4.8 4.5
Asia/Pacif ic (excl. Japan) 8.7 14.2 17.8 20.4 22.5 24.8 26.9
Rest of World 5.7 10.6 17.0 20.9 24.6 26.5 27.2
Total 39.0 60.1 79.4 94.0 107.0 116.7 122.9
MARKET SHARE (%)
United States 40.1 32.7 28.0 27.4 26.5 25.6 24.8
Western Europe 19.2 21.9 23.5 23.4 24.9 26.3 27.5
Japan 4.1 4.2 4.7 5.1 4.6 4.1 3.7
Asia/Pacif ic (excl. Japan) 22.2 23.5 22.5 21.7 21.0 21.2 21.9
Rest of World 14.5 17.7 21.4 22.3 23.0 22.7 22.1
Total 98.0 99.0 100.0 100.0 100.0 100.0 100.0
YEAR- TO- YEAR % CHANGE
United States 25.4 13.0 16.2 10.1 5.2 2.2
Western Europe 75.9 41.7 17.8 21.1 15.5 10.1
Japan 60.6 45.6 30.1 2.8 (3.3) (6.1)
Asia/Pacif ic (excl. Japan) 63.5 26.0 14.5 10.2 10.2 8.4
Rest of World 87.9 59.8 23.2 17.3 7.8 2.6
Total 54.0 32.0 18.4 13.9 9.0 5.4
Source: IDC's November 2013 f orecast report.

In addition, IDC predicts that between 2013 and 2018, worldwide mobile phone (smartphone and non-
smartphone) shipments will grow at a CAGR of 4%, with a 1.6% CAGR in North America, 2.4% in Latin
America, 2.4% in EMEA, and 5.6% in APAC. This suggests that non-developed regions will support most
of the growth for hardware going forward. Therefore, we believe that any slowdown in China, India, or
other non-developed regions could significantly affect the overall hardware environment going forward.
PC WORLDWIDE MARKET SHARE: THE BIG STAY BIG
According to IDC, worldwide PC shipments totaled 82.8 million units in the fourth quarter of 2013, down
4.9% annually and up 3.6% sequentially. Lenovo Group Ltd. emerged as the top player with an 18.5%
market share (up from 16.1% in the fourth quarter of 2012), followed by Hewlett-Packard Co. (HP), at
16.6% (17.3%); Dell Inc., 12.1% (10.9%); Acer Inc., 7.3% (8.1%); and ASUStek, 6.7% (6.4%). Solid
product development and channel expansion strategy aided Lenovo to capture higher market share. In
addition, Lenovo continues to benefit from a better PC landscape in the Asia-based regions relative to the
US and Europe. We think that HP and Dell will witness declining shipments in the EMEA region, stable
growth in the US, and improving shipments in India and other developing regions.
Within the US, PC shipments totaled 15.8 million units in the fourth quarter of 2013. HP emerged as the
top regional player with a 26.5% market share, followed by Dell, at 23%; Apple, 9.3%; and Lenovo, 10%.
HP was also the leader in the year-earlier period.
In response to a declining PC outlook, most vendors are reducing traditional PC/notebook production and
turning towards convertibles and all-in-one PCs. Recently, Samsung lowered its notebook shipment goal for
2014 to 7 million units, following slower-than-expected shipments in 2013. Unlike traditional desktop PCs
that comprise a separate monitor, system base unit, and power cable, all-in-one PCs utilize a different form
factorone that integrates the display and base unit into a common chassis, with the power cable permanently
attached to the entire mechanism.
THE SERVER MARKET TO REMAIN MUTED IN 2014
We believe the server market will continue to be adversely affected by ongoing server consolidation,
technology transitions, and challenging macroeconomic conditions across the globe. According to IDC
(February 2014), worldwide spending on servers totaled $52 billion in 2013. IDC expects this to grow at a
2.1% CAGR between 2013 and 2017. During this period, server unit shipments are expected to grow at a
4.6% CAGR, implying a decline in selling prices.
There is an increasing trend towards form factor specialization in the market as both blade and density-
optimized servers outperform the general market. These modular form factors are expected to gain adoption
with virtualized environments focusing on blades and large-scale homogeneous environments in data centers
focusing on density-optimized servers. As per IDC estimates, the share of bladed server revenue to total
server revenue is expected to grow from 17% in 2013 to 18% by 2017. The growth in the cloud computing
market is expected to drive growth in microservers. With lower space requirements, improved performance,
and greater cost efficiency, microservers are used largely in cloud data centers. In addition, the demand for
microservers will continue to be driven by the ongoing buildup of scale-out data centers running multiple
workload applications, intending to reduce unutilized processing capacity for lightweight workloads.
We think the increasing pressure on IT budgets will drive IT organizations to leverage the operational
benefits of the blade platform, by migrating from a complex heterogeneous legacy server environment to a
managed blade environment. The spending for high-end enterprise servers will continue to decline as users
continue to migrate to lower-cost modular systems. Overall, we see a muted outlook for the server market
near term.
STORAGE & PERIPHERALS: MODERATING GROWTH
The market growth rate for data storage by enterprises (i.e., large organizations, such as corporations and
government agencies) was expected to post a 0.1% decline in 2013, year on year, according to IDC. In

2013, enterprise storage revenues contracted due to macroeconomic weakness in both developed and
developing economies. We believe all the major segments within enterprise storage system, software, and
services will witness modest growth going forward due to improving business confidence in the developed
economies. According to IDC estimates, between 2013 and 2017, worldwide enterprise storage revenue is
expected to grow at a 3.7% CAGR. However, per IDCs May 2013 forecast, between 2013 and 2017,
enterprise storage revenues are expected to grow at a 3.1% CAGR in the US, 1.3% in Western Europe, 9%
in Asia Pacific, 1.7% in Japan, 6.5% in Central Europe/Middle East, 4.2% in Latin America, and 3% in
Canada. IDC estimates worldwide enterprise storage revenue to grow 3.2% in 2014, 4.1% in 2015, 4% in
2016, and 3.7% in 2017.
According to IDC, worldwide sales of disk storage systems fell 5.6%, year on year, to $7.4 billion in the
third quarter of 2013. EMC Corp., the market leader with a 30.6% share in external storage, saw its
revenues decline 1.3% during the third quarter. NetApp, ranking second with a 13% share, increased its
revenues 5.9%, while International Business Machines Corp. (IBM) was third with an 11% share and
witnessed a 6% decline in revenues.
Internal storage declined by 12% during the third quarter while external storage decreased by 3.5%. The
decline in the external disk systems market is largely driven by reduced spending in the US, Eastern Europe,
and Asia/Pacific (including Japan). However, Latin America, Canada, and Western Europe saw increases in
demand during the quarter.
We think a key growth area will be the constant and unabated demand for data storage. IDC estimates that
total disk storage capacity shipped in the third quarter of 2013 reached 8.4 exabyte, or EB (1 EB equals 1
billion gigabytes), up 16% over a year ago. While this growth rate was the highest of the prior five quarters,
it continued to represent a trend of relatively slow capacity growth.
We believe the domination of massive scale-out storage and the re-emergence of Do-It-Yourself (DIY)
storage architectures could hurt storage system demand. We believe that massive scale storage systems will
account for a significant amount of storage capacity. Their extremely low price levels will inhibit hardware
revenue growth. In addition, companies, which build or move toward building their storage in house, will
continue to buy storage capacity either directly through hard disk drive (HDD) and solid-state drive (SSD)
manufacturers, or through other channels, but not from storage system suppliers. Hence, this will reduce
demand for storage systems.
On the other hand, the rise of content driven enterprise could increase the demand for storage systems.
While the aggressive use of virtualization is reducing the rate of growth of servers deployed in data centers,
the creation, organization, and distribution of rich content is driving a rapid and sustained increase in
storage deployments. We believe the growth of content will lead to greater expansion for mega data centers.
SOLID STATE DEVICES POSE A MAJOR CHALLENGE TO HDD INDUSTRY
We believe that the worldwide hard disk drive market will continue to face significant headwinds, largely
attributable to a weak PC market. We believe most of the weakness in the PC market is due to a secular
decline caused by the emergence of tablet computers. Accounting for two-thirds of HDD shipments, the PC
market is the largest consumer of HDDs. The PC market share of HDD shipments is expected to decline to
50% by 2017. In 2013, HDD shipments declined by 5% from 2012. However, they are expected to grow at a
CAGR of 2.8% from 2013 to 2017, a forecast that we believe may prove to be too optimistic.
Given the modest decline in HDD prices, IDC predicts worldwide HDD revenues to grow at a CAGR of 2.3%
during 2013 to 2017. According to IDC predictions, between 2013 and 2017, Enterprise storage HDD
revenues will grow at a 4.4% CAGR, Personal storage HDD revenues at 11.1% CAGR, and Consumer
Electronics HDD revenues at 2.7%, but Desktop PC and Portable PC HDD revenues will decline at CAGRs of
4.1% and 2.2%, respectively. We note that this will significantly change the HDD revenue share by
application. Therefore, the shares of Enterprise, PC, and Consumer Electronics in HDD revenues will change
from 47%, 45%, and 8%, respectively, in 2013, to 56%, 36%, and 8%, respectively, by 2017. We think the

current weakness in the PC market, driven by a longer replacement cycle, will continue to prevent the HDD
industry from experiencing substantial growth.
We think another big headwind for the HDD industry is the substitution of solid-state drives (SSDs) for HDDs
in PCs and enterprise data centers. We think that over time SSDs will slowly displace HDDs as the mass
storage device used in PCs, driven by SSDs fast performance and application to thinner form factors.
Recently, IDC also lowered its HDD shipment forecast for 2013 from 591 million (in its April 2013 forecast)
to 548 million (October 2013 forecast) and for 2017 from 643 million (April 2013 forecast) to 612 million
(October 2013 forecast). We see even more downward potential from these revised estimates.
While we expect the HDD market to shrink, the SSD market is likely to witness robust growth going forward.
The long-term SSD market trends are tied to demand derived from the PC and tablet market. As noted earlier,
according to IDC estimates, worldwide device shipments (PCs and tablets) will grow from 536 million units in
2013 to 691 million units by 2017, implying a 6.5% CAGR. In addition, the PC/tablet ratio could shift from
59%/41% in 2013 to 45%/55% by 2017, due to the acceleration of tablet cannibalization of PCs.
Increasing interest in ultrabooks and ultrathin PCs could drive replacement cycles near term. We believe the
industry witnessed an attach rate to notebooks of around 20% in 2013. We think this growth will continue
with a more than 50% attach rate by 2016. We believe the improving attach rate is supported by benefits such
as reduced boot-up time, and improved battery life, speed, and heat dissipation, among other factors. We
think the SSD adoption rate at enterprise applications is increasing, driven by higher performance and
declining cost of ownership. In addition, we believe the enhanced performance offered by SSDs will present a
big opportunity for participants in the cloud and data center arena. An increasing amount of content on the
Internet, driven by extensive use of Facebook, YouTube, and Netflix, as well as companies reliance on the
Internet for day-to-day activities, will bring pressure to build more data centers. In addition, this will lead to a
shift to cloud applications for handling big data, which will increase demand for SSDs going forward.
According to IDC, worldwide SSD shipments will grow from 67 billion units in 2013 to 179.8 billion by
2017, implying a 28% CAGR. During this period, the average selling price is expected to decline from $137
to $95, or a compound annual decline of 8.7%. By value, worldwide SSD revenues will grow at 20%
CAGR from $9.2 billion in 2013 to $17.1 billion by 2017. By segment, between 2012 and 2017, client SSD
revenues are expected to grow at a 15.6% CAGR, enterprise SSDs at 27.2%, and commercial SSDs at
9.6%. Therefore, the ratio of client/enterprise/commercial is expected to shift from 60%/37%/3% in 2012
to 48%/50%/2% by 2016.
BIG DATA AND THE CLOUD: THE TWO KEYS TO STORAGE GROWTH
We believe that big data provides a key opportunity for storage vendors. As businesses become data-driven,
they enter a constant quest for analyzing and storing this data in a cost-efficient manner. Storage has played
and will continue to play a pivotal role in big data infrastructure. According to IDC estimations, global storage
in big data revenues is expected to grow at a 36% CAGR from $4.09 billion in 2013 to $13.98 billion in
2017. By segment, during 2013 to 2017, disk systems should grow at a 32.6% CAGR, tape automation
14.1%, storage software 33.6%, public cloud storage 40.4%, and storage services 41.5%.
Today, we think that there is a lack of appropriate storage technology to handle big data infrastructure. This
makes IT vendors invest heavily in products that address big data market demands. We think that
improvements to existing technology and development of new technology will enable more buyers to take
advantage of big data technology and services. There is an increasing focus on data unification requiring the
storage infrastructure for big data to cater to structured, semi-structured, and unstructured data types. In
addition, there is a growing emphasis on in-place analytics, such as the Hadoop Map/Reduce engine that runs
where the data lives. Ultimately, the widespread adoption of big data is driven by factors such as scalability,
performance, integration, security, and governance requirements. We see spending on big data technology
development increasing in the coming years.
We believe that the emergence of cloud computing will shape the future of IT spending. Cloud entails shared
access to virtualized resources over the Internet. With increasing content on the Internet, the shift to cloud

computing makes more sense, as it enhances performance in a cost-effective manner. This increases IT
spending on cloud technologies. As per IDC, cloud services spending will continue to grow at a double-digit
rate over the next few years, gradually accounting for a larger portion of all IT spending. By the end of 2014,
such cloud spending is expected to grow by 25%, according to IDC.
Recently, Quanta Computer Inc. announced its plan to expand its operating bases for the cloud computing
business. We note that large Internet players such as Google, Amazon, and Facebook are now directly seeking
cooperation with Taiwan-based original design manufacturers (ODMs) such as Quanta and Wistron Corp.
Inventec Corp. in May 2013 revealed that it would start supplying server products to some of its Internet
clients. Foxconn Technology Group constructed a cloud computing R&D center at the Kaohsiung Software
Park located in southern Taiwan in 2013. Acer and ASUStek have been pushing forward in marketing
hardware/software-integrated cloud computing solutions focusing on educational applications and web
storage, respectively, according to the companies. Samsung and Lenovo are collaborating with Taiwan
suppliers for cloud computing industry.
INDUSTRY REVIEW AND OUTLOOK
As of mid-April 2014, we had a neutral outlook on the S&P Technology Hardware, Storage & Peripherals
sub-industry. We think personal computer (PC) sales will be challenged going forward, hurt by continued
cannibalization by lower-priced tablet devices. Personal computers represent a big part of the industry, and
global PC unit shipments increased only about 4% in 2009, followed by growth of about 14% in 2010, as
tracked by market research firm IDC. PC unit sales were just under 2% in 2011. However, shipments fell
3% in 2012 and witnessed an additional 10% decline for 2013. We forecast that shipments will decline 5%
in 2014. Since mid-2010, PC unit sales appear to have suffered from consumers substituting media tablets,
which are smaller and less robust than traditional PCs and not generally counted as PCs, for laptop PCs.
While this substitution effect may pressure PC sales, the computer hardware industry overall should benefit
from the growth in tablets. Also, the growing popularity of robust mobile computing devices stimulates data
traffic to be handled by servers, creating another spur to the industry.
We see longer-term fundamentals in the computer hardware industry remaining attractive, albeit with lively
price competition and pressure on margins. We think a global need for better computing and communications,
especially mobile communications, creates an appetite for a wide range of technology products.
We foresee growing demand for Internet-based computing solutions because they offer companies
opportunities to reduce costs and improve customer service. Accordingly, servers and data-center computing
hardware should benefit from rising demand. However, we also see price competition in servers. We think
that hardware vendors have been seeking to offset the negative impact on profits by offering higher-margin
services, software, and storage products.
We see modest growth for the data storage hardware market in the next 12 months. We think demand for
data storage will be driven by content digitization of old media such as paper and film, growing popularity
of social networking websites, and longer record retention for compliance with government regulations. We
believe increased adoption of virtualization software will boost demand in the near term, as data storage
systems need to be upgraded to take advantage of the improved efficiency. We think the storage software
market will grow at a mid-single digit rate in the next 12 months. Drivers we see include business continuity
and disaster recovery efforts, compliance and risk management activities, and the increasing prevalence of
data mining and related analytics. We think one of the fastest growing sectors is virtualization software,
which helps companies improve efficiencies of existing IT infrastructures and lower operating expenses by
allowing servers to run multiple applications, rather than just one. We see a decline in the hard disk
manufacturing sector of the industry.

INDUSTRY PROFILE
Computer hardware: an important part of IT spending
Spending on computer hardware, defined as server and client (PCs and workstations) systems, represents
about a fifth of the worldwide spending on information technology (IT). More broadly defined to include
storage disk systems and tape, peripheral equipment such as printers, and networking equipment, as well as
the server and client computer systems, computer hardware is about 40% of total IT spending.
According to market researcher IDC, IT spending totaled roughly $1.5 trillion in 2008, and then fell about
4.5% (in constant currency terms) to about $1.43 trillion in 2009. In 2010, it rose about 11% to $1.59
trillion, surpassing the 2008 level. For 2011 and 2012, the worldwide IT industry grew 5.8% and 5.9%,
respectively, in constant currency. As per IDCs February 2014 forecast, IT spending increased by 4% in
2013 to surpass $2 trillion, and will grow by 4.6% in 2014. To put this level of spending in perspective, the
worldwide IT market was valued at about $1.0 trillion in 2001 and just $360 billion in 1993.
Widespread use of the Internet stimulated demand for a host of IT-related products and services. While such
investments may dip during years of slow economic growth, we think the longer-term outlook remains
positive. Because infrastructure development is needed to meet growing demand from new users and for new
applications, Internet-related spending should continue to rise.
The computer hardware industry can be divided into two main segments: PCs and servers (ranging up to
large-scale systems such as mainframes and supercomputers), with workstations as a minor third category.
In 2013, based on estimates from IDC, the value of worldwide PC shipments was about $200 billion,
servers were worth about $52 billion, and workstations $6.5 billion, for a total of roughly $260 billion in
computer hardware sales. This indicates that computer hardware is a substantial portion (approximately
11%) of about $2.4 trillion spent worldwide on IT in 2013, which includes spending on software and
services, and some near-cousins of the traditional computing industry (data storage machines, printers,
ATMs and retail kiosks, and other increasingly sophisticated office electronics). While the computer
hardware space still remains extremely important, we believe that this figure will continue to decline over
time as smartphones and tablets will be the growth engines for the hardware space in the years to come.
PC MARKET SHARE TRENDS
The PC market has witnessed rising concentration of market share among the top vendors. With consistent
pricing pressure in the industry, only the fittest PC producers have survived. In 1992, the top 10 worldwide
vendors accounted for roughly half of the market. From 1999 through 2002, however, just the top five
vendors commanded nearly half (45%) of the market. That level has continued to climb, with the top five
accounting for 59% of the market in 2010, 2011, and 2012, based on IDC data. Many industry forecasters
have long predicted that the top five vendors may hold 70% of the global PC market in the future.
Based on of worldwide unit shipments, Lenovo Group Ltd. emerged as the PC market leader in the fourth
quarter of 2013, with a 18.5% share (up from 16.1% in fourth quarter of 2012), followed by Hewlett-
Packard Co. (HP), with a market share of 16.6% (17.3%); Dell Inc., 12.1% (10.9%); Acer Inc., 7.3%
(8.1%), ASUStek, 6.7% (6.4%); and others, 39.6% (41.2%).
SERVER MARKETS: VOLATILE AND SHIFTING
The overall server market has been volatile since 2000, when worldwide factory revenues, which had
declined in the two previous years, peaked at $60 billion, boosted by the Internet build-out. The market slid
in the next two years, however, falling roughly 17% to $50.1 billion in 2001 and another 12% to $44.1
billion in 2001, according to IDC, reflecting a slump in IT spending amid the US economic downturn.

The server market improved from 2003 to 2005, led by demand for volume servers. According to IDC data,
worldwide server revenues totaled $46 billion in 2003, $49 billion in 2004, and $51 billion in 2005.
Modest increases of about 1% in 2006 (to $52.5 billion) and 5% in 2007 ($55.1 billion) were followed by a
decline of some 3% in 2008 (to $53.2 billion) and a decided slump of 19% in 2009 (to $43.2 billion).
Server sales rebounded 11.4% to $48.1 billion in 2010. In 2011, server sales registered a 5.8% increase to
$52.2 billion, but fell 1.9% in 2012 to $51.3 billion. In 2013, server sales declined 4.4% to $49.7 billion.
S&P Capital IQ expects expansion with IT spending in 2014 and beyond. However, we expect pricing
pressure to limit revenue potential in servers in the long run, and submit that this is one factor driving the
server makers to try server-plus growth strategies, to coin a phrase, wherein the server is a means to sell
software and services as a total data center
package with higher growth and margin potential.
As measured by worldwide server systems factory
revenue, HP led the server market in 2013 with a
market share of 26.6%, but witnessed a revenue
decline of 6.4%, versus an overall market
contraction of 4.4%. IBM, the market leader in
2012, lost share of the server market25.6% in
2013, versus 30.3% in 2012as its factory
revenue declined by 19.1% for the year. Dell
gained share and remained solidly in third place in
2013, with revenue growth of 2.7% and server
market share of 16.6%. Oracle, the owner of the
Sun Microsystems server products, continued losing market share in 2013. Cisco improved its position with
revenue growth of 38.7% and market share of 4.5% in 2013.
DATA STORAGE: A LARGE AND GROWING INDUSTRY
The data storage industry is a large and growing industry. It is comprised of enterprise storage system
providers, including EMC Corp. and NetApp Inc.; IT hardware manufacturers like International Business
Machines Corp. (IBM) and Hewlett-Packard Co. (HP), which sell data storage systems along with their
servers; and hard disk drive manufacturers such as Western Digital Corp. and Seagate Technology.
Data storage providers: whos who in the storage business
The computer storage business is divided into several segments, which are detailed below.
Storage systems. Typically considered at the top of the storage food chain are storage systems vendors,
such as EMC, Hewlett-Packard (HP), and IBM, that address the selection, integration, and implementation
of most of the components affecting enterprise data storage. In the second quarter of 2013, EMC was the
market leader with a 31.3% share. Net App was No. 2 (13.3% share), followed by IBM (12.6%), HP
(10%), and Dell (7.6%).
This segment can be further divided by the type of storage system. Typically, application servers will include
three or more enclosed mass storage devices. These types of storage are called internal storage and are not
designed to be shared with other application servers. All storage systems outside of the server enclosure are
called external storage. Often, external storage gets more attention than overall storage systems because it
comprises about 70% of the market and is faster growing. We expect this trend to continue, given the
increased adoption of cloud computing and the need for networked storage systems. In the third quarter of
2013, EMC was the market leader in external storage with a 30.6% share. NetApp was second (13%),
followed by IBM (11.4% share), HP (9.5%), and Hitachi Ltd. (8.3%).
Storage software. Trends such as virtualization are enhancing the role of software for management and
security of stored data. EMC, Symantec Corp., IBM, NetApp, and HP are the top five suppliers of storage
software, according to the latest available data from IDC. Consolidation in the storage software marketplace
TABLE 6: WORLDWIDE
SERVER SYSTEMS FACTORY
REVENUE
WORLDWIDE SERVER SYSTEMS FACTORY REVENUE
- - - - - REVENUES (MIL. $) - - - - - MARKET SHARE (%)
VENDOR 2012 2013 % CHG. 2012 2013
HP 14,149 13,240 (6.4) 27.2 26.6
IBM 15,749 12,746 (19.1) 30.3 25.6
Dell 8,057 8,275 2.7 15.5 16.6
Oracle 2,660 2,329 (12.4) 5.1 4.7
Cisco 1,610 2,232 38.7 3.1 4.5
ODM 1,790 2,816 57.3 3.4 5.7
Others 8,013 8,085 0.9 15.4 16.3
TOTAL 52,028 49,722 (4.4) 100.0 100.0
Source: IDC.

has consisted largely of the major players buying smaller, often privately held, companies that have a unique
technology or service provided by their applications.
Storage components. In our view, the components space (the underlying technology products that are
used to create a networked storage environment) comprises two main categories: host bus adapters (HBAs)
and switches. The components side of the business has seen some consolidation: Brocade Communications
Systems Inc., a switch maker, merged with McData Corp. in 2007 and acquired Foundry Networks Inc. in
December 2008. We note that Emulex Corp. and QLogic Corp. have dominated the HBA market. Cisco
Systems Inc., Brocades largest competitor on the switch side, is also a leading supplier of network
infrastructure components, which are key to networked storage systems.
Hard disk drives. Despite the increased price competitiveness of flash memory and solid-state drives, the
hard disk drive remains the preferred choice for storing mass amounts of data due to its relative high
performance and low costs. Currently, the hard disk drive industry is comprised only of five vendors. In
terms of unit shipments in 2013, Western Digital was the market leader with about a 45% share, followed
by Seagate (40% share) and others (15%).
Enterprise data storage industry
According to research firm IDC, the enterprise data storage market, which includes hardware, software, and
services, totaled $80.8 billion in 2012, up 4.2% from 2011, reflecting improvement in the global economy.
The improvement in the storage industry was broad-based and spanned all major sectors. The enterprise
storage systems segment (recording media and related data system components) increased 4.8% to $35
billion in 2012, after rising 9.2% in 2009. IDC expected to see no growth in enterprise storage in 2013.
According to IDC, more than 75% of end-user spending will be on external storage systems, which it
expects will grow at a 3.8% compound annual growth rate (CAGR) through 2017. Spending on internal
storage will grow at only a 0.4% compound annual growth rate.
Storage software revenues increased 1.1% in 2012 to $14 billion, and were expected to grow by 5.2% to
$14.79 billion in 2013. According to IDC, such revenues were projected to grow at a CAGR of 4.9%
between 2013 and 2017. Applications like e-mail archiving and deduplication that help customers optimize
their environment and reduce overall costs are expected to gain traction. These factors are expected to help
this market reach $17.8 billion in 2017, according to IDC.
The worldwide market for storage services increased 5.3% to $31.8 billion in 2012. According to IDCs
November 2013 forecast, the market was expected to grow by 5.6% to $33.6 billion in 2013 and to $35.5
billion in 2014. We believe server virtualization and data center transformation will be the catalysts for
growth over the next several years.
Although the global economy is improving, we believe critical issues confronting data center operators, such
as space constraints and low utilization rates, will get worse. They continue to look for ways to improve
performance and efficiency. These demands, along with the need to lower data storage costs by better
managing existing assets, have moved server and storage virtualization into the mainstream. The need to
improve energy consumption by reducing the number of servers used feeds into the trend of being green,
or environmentally friendly, a move that users and investors alike are supporting.
We think that key emerging markets will provide viable opportunities for storage growth. India and China
are undergoing expansion that is accompanied by increases in the amount of data requiring storage. In
addition, the development of these economies will also bring some form of regulatory compliance, which we
think will result in additional revenue opportunities for storage systems. Overall, we continue to see a
sustained need for storage solutions, though demand among the various hardware and software components
will vary, driven by a combination of regulation, information management, and strategic growth drivers by
the user community.

Hard disk drive industry
According to IDC, the hard disk drive market totaled $37.5 billion in 2012, up 13% from 2011, reflecting
higher selling prices due to consolidation within the industry and following the Thailand floods in late
2011. In 2012, Seagate acquired Samsungs hard disk drive business while Western Digital purchased
Hitachis hard disk drive business leaving only three participants in the industry. While fundamentals and
prices were extremely strong during the first half of the year, industry conditions began to roll over in the
second half due to a decline in the PC market. Risks to the hard disk drive space in the future include more
consumers purchasing mobile devices (tablets and smartphones) instead of PCs and greater adoption for
solid state devices.
The hard disk drive industry is an oligopoly,
comprised of only five vendors. In terms of unit
shipments in 2013, Western Digital was the
market leader with a 45% market share,
followed by Seagate Technology (40% share)
and others (15%).
Although just a handful of hard disk drive
manufacturers make up the industry, they
operate in an intensely competitive market.
Hard disk drives differ by storage capacity,
form factors, speed performance, and power
usage, but are viewed as commodities because one drive can be easily substituted for another. In addition,
the cost of switching between different vendors is low because of standards in the input/output connections.
Consequently, the industry has experienced wide swings in pricing due to either an industry supply shortage
or overcapacity.
INDUSTRY TRENDS
During each evolutionary phase of the computer hardware industry, the price for computing power has
decreased, usability has improved, and the market has broadened. Business spending largely drove growth
in computer hardware sales throughout the 1990s. The consumer market became increasingly important
during the latter half of that decade, as the Internet boom contributed to rising consumer demand for
personal computers (PCs), and that trend has continued. Since 2000, increasing use of computers for audio-
visual media is contributing to hardware demand.
Looking back to the 1970s, during the early stages of the industrys evolution, businesses used computers to
automate back-office operations such as accounting. Continued advances in technology led to increased
computing power, while the size of computers decreased. By the 1980s, computers were small enough to sit
on a desktop, and the PC was introduced. Although largely a productivity tool for front-office tasks such as
word processing, the new devices also spurred consumer demand for computers.
Network computing, the most recent stage in the computer hardware industrys evolution, has presented a
strategic inflection point in the proliferation of PCs and servers. Initially, networked computers attracted a
growing base of corporate users. The emergence of the Internet gave this market another shot in the arm
and added an unprecedented number of consumers to the mix.
Cloud computingin which users buy processing power as a service via the Internet, rather than having to
buy and maintain hardwareis an emerging part of the business. The cloud approach to delivering
computing has the potential to offer users a lower-cost alternative and to create a breed of data centers that
would cater to cloud users.
Rapid proliferation of the Internet culminated in strong growth for the computer hardware industry in 1999
and most of 2000. However, the industrys fortunes reversed in 2001, and demand remained soft in 2002,
reflecting the global economic downturn. From 2003 through about mid-September 2008, the market
Table 7:
WORLDWIDE
HARD DISK DRIVE
REVENUES, BY
VENDOR
WORLDWIDE HARD DISK DRIVE REVENUES BY VENDOR
- - - - REVENUE (BIL. $) - - - -
COMPANY 2011 2012 % CHG 2011 2012
Seagate 11.5 16.3 41.7 34.9 43.4
Samsung 2.4 7.4
Western Digital 9.2 15.1 64.1 27.9 40.4
HGST 5.8 1.5 (74.1) 17.5 4.1
Toshiba 4.1 4.6 12.2 12.4 12.2
Total 33.1 37.5 13.3 100.0 100.0
Totals may not add due to rounding.
Source: IDC's August 2013 f orecast report.
MARKET SHARE (%)

expanded. Then a global economic downturn knocked information technology (IT) spending down about
4.5% for 2009, with hardware suffering more than software or services. A recovery year in 2010 saw IT
spending rise about 8%. Worldwide IT spending continued its growth momentum in 2011 and 2012, with
respective overall increases of 5.8% and 5.9%, year on year, at constant currency, according to IDC.
However, IT spending increased at a slower growth rate of 4% in 2013.
US PC MARKET GOES FROM BOOM TO MATURE TO BUST
Just when the computer hardware industry was considered mature in the latter half of the 1990s, the
industry witnessed a resurgence ushered in by the Internet age. Demand to get onlinecoupled with the
proliferation of low-priced (in some cases, even free) PCsbolstered demand in the US through 1999.
According to IDC, US PC unit shipments increased by 27% and 24% in 1994 and 1995, respectively. When
annual growth slipped to 15% in 1998, many observers concluded that growth in the US was decelerating
because of a saturated market. Then, in 1999, US PC shipments surged 25%.
From 2000 through 2002, however, PC sales growth slumped in the US. According to Gartner Inc., an IT
market research firm, US PC shipments rose less than 8.0% in 2000, declined approximately 11.0% in
2001, and grew by 4.4% in 2002. Picking up the trail from there, figures from IDC show that US PC
shipments grew about 10.8% in 2003, 10.5% in 2004, and 8.5% in 2005. Growth decelerated in 2006,
with US unit shipments up only 3.6%. Growth improved in 2007, but only to about 7.6%. Results for 2008
were an increase of only 2.1%, followed by better growth of nearly 8.4% in 2009 and 6.1% in 2010.
However, the growth reversed in 2011 and 2012, as US PC shipment declined 4.9% and 7.7%, mostly due
to the shift in consumer demand towards lower-priced tablets. In 2013, US PC shipments declined by 2.8%.
We expect US PC sales to experience another decline in 2014.
Market concentration, which was becoming evident by the late 1990s, became pronounced with the
combination of Hewlett-Packard Co. (HP) and Compaq Computer Corp. in 2002, Gateway Inc.s
acquisition of eMachines Inc. in 2004, and International Business Machines Corp.s (IBMs) sale of its PC
unit to China-based Lenovo Group Ltd. in May 2005. The consolidation trend continued when Taiwan-
based Acer Inc. acquired Gateway Inc. in October 2007. In addition, computer hardware vendors have
broadened their product offerings to offset declining margins. These companies are now becoming more
focused on cash management and on higher inventory turns and returns on assets.
While the PC industry is certainly maturing, in S&P Capital IQs opinion, there are still geographic areas
where PC penetration is well below saturation levels. In addition, the introduction of higher performance
products and Internet services (including broadband access) will likely continue to boost demand over the
next several years, sustaining unit growth in the high single-digit range over that period.
COMPETITIVE PRICING EVERYWHERE
Several factors have affected computer hardware pricing and sales trends. While chip prices continue to fall
and component prices decline steadily, the industrys consolidation has also enabled computer companies to
trim operating expenses. Consolidation, however, has also contributed to a more intensely competitive
pricing environment that continues to weigh on all computer hardware categories. Vendors try to offset
price declines by achieving better volumes via market share gains, and the competitive cycle continues. In
the following discussion, we present some context for the pricing pressures at work in the various segments
of the computer hardware industry.
PCs. Price competition has been the hallmark of the PC market. One reason is that PCs have become
more commodity-like with the standardization of their primary components. Microsoft Corp.s Windows
operating system software is used in an estimated 85%90% of PCs worldwide, and Intel Corp.s
processors are used in approximately 80%.
Price competition in the PC market became fierce in 1992, when Compaqs price actions precipitated a
shakeout among second- and third-tier suppliers. Compaq led the charge again in 1997, dominating the
sub-$1,000 PC market at the low end of the market and challenging the price points of direct sellers such as

Dell at the high end. Over the past few years, prices have continued to erode, particularly in the desktop
market.
Traditionally, direct sellers have been able to underprice indirect sellers like Compaq and HP, which sell
through retail channels. This is because direct sellers yield savings by maintaining low inventory levels. In
addition, they do not have to pay the incentives or price guarantees that indirect sellers typically pay
resellers. However, many PC makers who sell indirectly are now also using the direct sellers techniques
such as online order capabilities and build-to-order strategiesto gain efficiencies and narrow price gaps, as
well as reduce their cost structures to compete better on price.
Servers. In contrast to the PC market, the explosive growth in servers in the late 1990s attracted new
entrants. Lured by growth rates of 25%+ projected for this segment, PC server participants further
stimulated the market with dramatic price cuts. Demand also benefited from a technology migration to
systems with Intels server-based chips (originally Pentium Pro, followed by Pentium II/III processors and
the newer Pentium IV, launched in 2000, and Itanium in 2001) and Microsofts Windows NT Server and
Windows Server 2000 operating systems. Windows Server 2003, released in April 2003, witnessed traction
with users in 2004, as shipments of paid new licenses for this operating system more than doubled.
Additional gains of 23.7% and 13.8% were attained in 2005 and 2006, respectively. Growth slowed in the
recession of 200809, but rebounded strongly coming out of the downturn.
Workstations. Growth in this area has been challenged as manufacturers have faced PC-like pricing
pressures given the influx of PC-based units. Revenues have also been under pressure as the lower-priced
Windows NT workstations have grown at a faster pace than traditional workstations. [Traditional
workstations use the Unix operating system and reduced instruction set computer (RISC) microprocessors.]
Large-scale systems. Pricing pressures on large-scale systems like mainframes have been well documented.
US businesses are actively moving mainframe applications to other computer platforms, mostly to
client/server systems and local area networks (LANs). The competition from the popular client/server and
LAN environments has forced mainframe vendors to become more price-competitive. In recent years,
however, mainframe makers, led by IBM, have introduced easier, cheaper systems that use complementary
metal oxide semiconductors (CMOS). Migration to these new machines should sustain unit growth, partly
offsetting the pressure on revenue growth.
THE UPGRADE CYCLE: WINTEL AND BEYOND
Demand for new computers typically accelerates as users migrate to faster processors and/or new operating
systems. This is known as the upgrade cycle, a trend that has proven powerful in the PC business. The
upgrade cycle assumes that when a new operating system is released, users will trade up to PCs that are
more powerful, thus stimulating hardware sales. This happened in 1995, when the introduction of
Microsofts Windows 95 caused a surge in PC shipments: in order to handle the new operating system,
consumers needed to upgrade to PCs that were more robust.
The upgrade cycle was again apparent in the first quarter of 1997, when US PC shipments grew 20%, the
highest year-to-year increase since 1995. This growth was buoyed by migration to MMX (Intels
multimedia software instruction set), as well as by a continuing wave of corporate upgrades to Pentium Pro
machines with Windows NT.
The combination of Windows operating systems and Intel processors has been nicknamed Wintel. The
Wintel dynamic is permeating almost all computer platforms, because of its compelling price/performance
compared with the alternative: the reduced instruction set computer (RISC) processor/Unix operating
system combination, which had long dominated multiuser systems and workstations.
Another upgrade cycle was launched with Microsofts Windows 2000. However, there was a much more
gradual uptake than in prior cycles. The operating system was officially launched in early 2000, but the
momentum in user upgrades to the platform was less robust than early predictions. The industry was also
expected to witness an upgrade cycle in 2002 with the introduction of Windows XP, which was launched

on October 25, 2001. Both of these upgrade cyclesthe former aimed at the business market and the latter
at consumerswere limited by the US economic downturn in 2001 and 2002.
The launch of Vista heralded the next major upgrade from Microsoft. The enterprise version was released in
November 2006, and the consumer-based offering debuted in January 2007. Adoption rates were slower
than in previous Microsoft upgrades; reasons included mixed reviews of the product and, despite some
product enhancements, a lack of compelling new technological features, in our view. The next PC operating
system from Microsoft was Windows 7, available since fall 2009. This version has been generally well
received and may have released some pent-up demand from PC users who sought to skip the Vista era and
thus have aging PCs.
The most recent upgrade from Microsoft was Windows 8, released in October 2012. This is the first Windows
operating system that supports touchscreen, and we expect that it will help Microsoft capture market share in
the high-growth smartphone/tablet market. This is the first time Microsoft has taken the decision to create an
ARM-based version of its Windows operating system and thus break away from the Wintel monopoly.
Though Microsoft is the dominant player in the PC market, it has less than 5% share of the smartphone
market and a negligible share of the tablet market. By tying up with ARM, which is the dominant player in the
smartphone and tablet markets, Microsoft expects to increase its market share in both of these fast growing
markets. In September 2013, Microsoft entered an agreement with Nokia Corp. under which it would pay
3.79 billion to purchase substantially all of Nokias Devices & Services business, and 1.65 billion to license
Nokias patents. The transaction is expected to close in the first half of 2014, subject to regulatory approvals
and other closing conditions. With this transaction, Microsoft aims to accelerate the growth of its share and
profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
ENTERPRISE DATA STORAGE: THE INTERNET, DIGITIZATION, REGULATION DRIVE DEMAND
The amount of data that enterprises generate is growing at an exponential rate. Business processes that used to
be done on paper are being computerized. For example, all modern airplanes are designed using computer-
aided design (CAD) software. This software
enables testing to be done in a computer
simulation rather than the traditional
method of building physical prototypes,
resulting in faster analysis and lower
production costs.
We think there are several other drivers for
the data storage explosion. In addition to
the pervasive use of computing technology,
we believe the growth of the Internet and e-
commerce has increased the need to record
data. We also think the increased usage of
rich media content, which includes
broadcast and shared audio, graphics, and
video, has been a major factor for
increased demands on data storage.
Globally, we think the growth in emerging
markets is also driving the increased need
for regulation and oversight, as is the case
with the enactment of the Japanese version
of Sarbanes-Oxley, which requires firms to
submit internal control reports on a
consolidated basis starting with the fiscal years commencing on or after April 1, 2008. The requirements for J-
Sox, as it is popularly known, will be modeled on the US version in many ways and thus will require many of
the same data storage, archival, and retrieval technologies.
Chart 8: Price
per gigabit of
data storage
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
PRICE PER GIGABYTE OF DATA STORAGE
(In dollars)
External Internal

We believe that these requirements will boost overall interest in storage-related products because existing levels
of capacity are likely to be insufficient to hold ever-expanding quantities of data. Under Sarbanes-Oxley,
information needs to be stored for at least seven years. In addition, information must be protected, unaltered,
well organized, and easily accessible. The protection aspect is a key component of the new law: it requires that
records be stored in an unalterable way in order for them to be certified. Although the overall impact of
compliance with these measures is still being determined, it will certainly force IT managers to reevaluate
their ability to handle the potential inflow of large quantities of vital information.
Partially offsetting the rapid growth in the demand for enterprise data storage is the price decline in the cost
per gigabyte of storage. Most critical data are stored on hard disk drives. Due to new developments in hard
disk drive technology, such as perpendicular recording, the aerial density of disk storage devices has increased
dramatically, similar to Moores law in computing hardware, thus enabling more data to be stored on the
same amount of physical space.
THE MOVE TOWARD NETWORKED STORAGE
Companies have a number of ways to design their enterprise data storage systems. The legacy configuration
is a direct-attached storage (DAS). In this configuration, the storage subsystem is directly connected to a
general-purpose server. One of the benefits of DAS is its simplicity. It is relatively easy to install and does
not have complex interoperability requirements. While the installation is straightforward, DAS can cause
bottlenecks because the general-purpose server is burdened with the tasks of locating files on the storage
array attached to it. The traffic between various servers and users can also impair transmission speed.
Additionally, DAS tends to have lower disk utilization rate because the storage system is often disparate in
which storage capacity cannot be shared.
Network-attached storage vs. storage area network
There are two main alternatives to DAS: network-attached storage (NAS) and storage area network (SAN).
Both of these methods remove the processing of data from the primary company server, thereby allowing for
improved network performance and the ability to continue to access information if the server goes down.
In NAS architecture, stored data are attached to the network through a server with a special operating system
optimized to provide access at the file level. As a result, NAS takes the processing burden off the server and
alleviates some of the data input/output responsibilities. NAS transports data through the Local Area Network
(LAN) transports, such as Ethernet. While NAS does not require a separate file transport network, the data
transmission rate is bound by the limit of the LAN bandwidth.
Table 9: WORLDWIDE
EXTERNAL ENTERPRISE
STORAGE SYSTEMS REVENUE
FORECAST
WORLDWIDE EXTERNAL ENTERPRISE STORAGE SYSTEMS REVENUES
(In billions of dollars)
CAGR (%)
INSTALLATION ENVIRONMENT 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20122017
Direct (DAS) 4.54 3.56 3.10 2.77 2.59 2.35 2.23 2.17 2.10 2.05 (4.6)
Mainf rame networked
(ESCON/FICON SAN) 0.79 0.66 0.73 0.89 1.10 1.07 1.04 1.04 1.01 0.99 (1.9)
Open networked 16.22 14.83 18.68 21.47 22.62 23.36 24.54 25.95 27.33 28.67 4.9
NAS 3.77 3.65 5.44 5.93 6.07 6.24 6.69 7.19 7.68 8.15 6.1
SAN 12.45 11.18 13.24 15.54 16.55 17.13 17.85 18.76 19.65 20.52 4.4
Fibre Channel 10.91 9.15 10.25 11.78 12.51 12.81 13.14 13.52 13.89 14.19 2.5
iSCSI 1.48 1.85 2.70 3.25 3.47 3.63 3.86 4.20 4.52 4.84 6.8
Inf iniBand 0.03 0.05 0.13 0.35 0.39 0.45 0.46 0.50 0.56 0.61 9.6
Switched SAS (SAS SAN) 0.02 0.13 0.15 0.14 0.15 0.14 0.19 0.21 0.23 0.27 12.5
Fibre Channel over Ethernet 0.02 0.02 0.03 0.09 0.20 0.32 0.45 0.61 86.6
TOTAL 21.55 19.05 22.51 25.13 26.30 26.78 27.81 29.16 30.45 31.71 3.8
Source: IDC's November 2013 f orecast report.

SAN is a dedicated network providing storage and backup solutions, and it is on a separate network from the
LAN. SAN transports data via Fibre Channel transport, utilizing one of several protocolsFibre Channel,
iSCSI, or InfiniBandwhich are described below.
Fibre Channel. Fibre Channel is the primary networking technology used in the storage area network
(SAN) environment to transmit data between computer devices. This technology had its origins in the R&D
operations of several prominent high-tech companies. Fibre Channel has become the dominant transmitter
within SANs because of its ability to address the limitations of the previously adopted technology, small
computer systems interface (SCSI).
SCSI is a short-range protocol that links host computers with storage devices. Although it was suitable for
managing basic configurations, it was not designed for networking multiple server connections. In addition,
SCSI suffers from limitations related to distance, speed, and scalability: it can extend up to 25 meters and
scale a maximum of 16 devices. In contrast, Fibre Channel can reach up to 10 kilometers and connect
thousands of devices. Moreover, Fibre Channel operates at a much faster rate than SCSI.
iSCSI. After emerging as an alternative to Fibre Channel networking, Internet small computer systems
interface (iSCSI) has become the fastest growing interconnect method for networked storage systems. iSCSI
is an Internet Protocolbased standard for linking storage devices over a network. Keys to the growth and
adoption of iSCSI include the desire for a lower-cost, less complicated networking infrastructure from small
and medium-sized businesses, and larger companies need to aggregate stranded servers and provide remote
office networking.
Over the last several years, impediments to the adoption of iSCSI have included the lack of promotion by
vendors with large installed bases of Fibre Channel SANs, as well as ignorance on the part of customers
about the tradeoffs involved. Server virtualization is considered to be the application that can drive
increased iSCSI implementation, especially for small and medium-sized businesses. Additionally, as 10
gigabit Ethernet proliferates in the interconnect marketplace, it will drive some market share away from
Fibre Channel SAN to iSCSI SAN, in our opinion.
InfiniBand. This increasingly popular interconnect technology is used in high-performance computing
environments to deliver high data rates. While Gigabit Ethernet is still the leading interconnect technology,
InfiniBand has continued to gain share as a preferred interconnect technology, at the expense of some more
widely used solutions in the data center, according to IDC. As the rollout of 10 gigabit (GB) Ethernet
continues to experience delays, InfiniBand appears to be gaining favor in the high-performance computing
(HPC) arena.
THE EVOLUTION OF THE DATA CENTER
The way we compute has evolved through the years. During the 1970s and 1980s, the dominant computing
platform was the mainframe computer. Mainframes were the most powerful computers available, but were
expensive. They also required a special environment in which to operate. Since all of the computing was
done at a central location, it was also called centralized computing. Companies ran multiple applications on
a single mainframe machine to maximize their return on investment. It was common to find mainframes
with peak utilization rates of over 90%.
The mainframe computers were displaced in the late 1980s and early 1990s with the rise of personal computers
and low-cost servers, which established the model of distributed computing. Personal computers were cheap and
could be deployed anywhere. Departments and other subgroups could purchase them and develop applications
outside the control of a centralized IT environment. Consequently, most software applications were
developed without any standard process and followed a one-application-to-one-server model.
As applications become more mission-critical, the servers were moved into formal data centers. A data
center is a facility used to house computers, networks, and storage systems. It generally includes redundant
or backup power supplies, redundant data communications connections, air conditioning, and fire

suppression and security devices. It also contains automated systems that constantly monitor server activity,
web traffic, and network performance.
The number of servers has proliferated, as more software applications are written. Each new application
would require at least one additional server. More would be required if a company planned to develop and
test each application on a separate server. The growth in the number of servers has been accelerated by the
rise of the Internet.
The task of managing a data center has become increasingly difficult. Many data centers have simply run
out of space. Another problem has been rising energy costs, which typically account for 40% of the cost of
operating a data center. These two issues have been exacerbated by the fact that most servers are only
utilizing a fraction of their processing power. Data center operators describe the condition of having a large
number of servers running at very low utilization as server sprawl.
Virtualization can alleviate server sprawl by consolidating many different types of workloads and operating
systems onto virtual environments, all running on a single hardware platform. Using servers more efficiently
involves fewer processing cycles; this, in turn, reduces cooling and ventilation requirements, along with
energy usage. These benefits are consistent with the drive to be green, or environmentally friendly.
HARD DISK DRIVES VS. SOLID-STATE DRIVES
Hard disk drives, which store data magnetically on rotating rigid platters on a motor-driven spindle, offer
several key advantages over other forms of electronic data storage. They can provide high storage capacity
at relatively low costs and offers relative high-speed performance.
An alternative to hard disk drives (HDDs) is solid-state drives (SSDs). Solid-state drives record, store, and
retrieve digital data using integrated circuits (ICs) rather than magnetic. Because they do not have any
moving parts, solid-state drives have faster read/write speeds. They also generate less heat and have lower
power consumption. Solid-state drives can come in smaller form factors than hard disk drives. However,
solid-state drives are currently much more
costly per GB and are available in much
lower capacity points than hard drives.
In our view, SSDs will hurt sales of HDDs
over time, but not so much as to prevent
growth of HDDs. We see increased usage of
SSDs in devices in which the advantages of
SSDs, such as lower power consumption
and smaller form factors, outweigh its
main disadvantage, its price. Thus, we
believe SSDs will make inroads in
Ultrabooks, tablet computers,
smartphones, and other mobile consumer
electronic devices. However, we believe
hard disk drives will remain the preferred
choice of storing data on desktop
computers, gaming consoles, set-top boxes,
and personal/digital video recorders
because power consumption and form
factor are not major considerations for
these devices.
We also see SSDs targeting enterprise applications, where the value proposition is based on cost per transaction
or cost per I/O (input/output), rather than on cost per megabyte. Several smaller companies, like STEC Inc., are
targeting enterprise applications. We think the demonstration of viability and the adoption of these products
could lead to widespread development of enterprise SSDs by the major disk drive manufacturers.
CHART 10: WORLDWIDE
SOLID STATE DRIVE
SHIPMENTS AND REVENUES
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Shipments (left scale) Revenues (right scale)
Source: IDC's May 2013 forecast report.
WORLDWIDE SOLID STATE DRIVE SHIPMENTS AND REVENUES
(Bil.$) (Millions of units)

HOW THE INDUSTRY OPERATES
The modern computer hardware industry began in the early 1980s with the introduction of the personal
computer (PC). Before then, computing was dominated by mainframes from International Business
Machines Corp. (IBM) and confined mostly to computer professionals and scientists.
The Altair 8800the first commercially successful PC in the early 1970sspawned much of what is
thought of as modern computing. In a general sense, the Altair 8800 provided the seeds for the eventual
introduction in 1981 of IBMs PC. In a more narrow sense, the Altair introduced two key concepts that
remain critical to computer hardware manufacturers to this day. First, because the Altair was mass-
produced, the manufacturer was able (eventually) to obtain Intel Corp.s 8080 chips at an attractive price.
Second, the Altair was based on an open-system architecture.
Furthermore, it was the Altair, gracing the cover of Popular Electronics, a magazine aimed at the electronics
hobbyist, on January 1, 1975, that inspired Bill Gates and Paul Allen to develop a version of BASIC, the
first language program for a PC. Following the Altair was a rash of introductions of other personal computing
devices, including the Commodore PET, RadioShack Corp.s TRS-80, and the Apple II from Steve Wozniak
and Steve Jobs. At that time, however, these PC devices were mainly the province of hobbyists.
In 1981, IBM introduced the IBM PC, launching the PC market and transforming the industry forever. The
PC not only brought computers to a broader customer base, it also was one of the first IBM products to
adopt an open architecture, in which IBM revealed the instructions and specifications. This enabled other
companies to develop their own PC clones that would be compatible with IBMs machine, as well as
peripheral devices, such as external storage, printers, and video and sound devices, among others.
This open architecture quickly evolved into a de facto industry standard. It included a microprocessor from
Intel and the Windows operating system from Microsoft Corp. with its graphical user interface, which
eliminated the need for users to remember the arcane commands required by its predecessor operating
system, MS-DOS. Once computer makers were able to clone IBMs PC based on its open-standard
architecture, PC sales took off, and prices came down. This effectively began the commoditization of the
PC, which is still a major force in the economics of the industry.
The development of the PC coincided roughly with the birth of todays other major computing platforms:
servers and workstations. Serverswhich, at the most basic functional level, closely resemble PCsare used
by enterprises (corporations, governmental agencies, and educational institutions) to handle large computing
needs. Servers have become so widespread that mainframes, while technologically distinct, are now
categorized as another class of server. Together with the PC, servers created a new model of computing
known as the client/server model, in which a client (normally a PC) requests a file or other information
from a server via a network connecting the two. This allows the more powerful server to share its resources
with many other, less powerful client computers.
Workstations are the other major computing platform. Introduced in 1982 by Sun Microsystems Inc.
(which was acquired by Oracle in January 2010), they too are closely related to PCs. Essentially, they are
high-end PCs with advanced graphics capabilities that are designed to handle data-intensive scientific and
engineering applications.
COMPUTER FORM FACTORS
Just about every kind of computer comes in a variety of form factorsphysical designs that play a large
role in determining the computers potential uses and markets. The most common form factor distinction in
the PC market is that between desktop and laptop (or portable) computers. Laptops contain similar
electronics to desktops, but they must also meet a unique set of requirements, such as reduced power usage
and heat generation. Historically, a laptop or portable PC typically meant a notebook-sized computer, but
in recent years, a smaller ultraportable form factoroften called a mini-notebook or netbookbegan to
emerge as another type of laptop that allows users to connect to the Internet while on the go.

Tablet computers are a form factor somewhere between netbooks and laptops. In 2010, Apple scored a hit
in the tablet category with the introduction of its iPad product. [Note that many market researchers,
including IDC, count devices like the iPad as a media tablet, and not as a tablet PC, which has a more
robust, PC-like operating system.] The high consumer appetite for tablets has essentially eliminated the
netbook markets following the boom of 2009 and early 2010. In 2013, 221 million tablets were shipped, up
from 144.2 million in 2012 and 76.2 million in 2011. Total shipments are expected to surpass 270 million
in 2014.
Servers and workstations also come in a variety of form factors. In recent years, blade or rack-optimized
servers, which are simply circuit boards designed to standard specifications, have become popular with
corporations and other enterprises. They allow customers to create standardized, expandable computer
racks and easily add or remove individual servers.
ASSEMBLERS, MARKETERS, AND MANUFACTURERS
The companies that produce PCs, servers, and workstations are often thought of as manufacturing
companies; in reality, however, they do little more than assemble a standard set of components bought from
various third parties. Since these components are often sourced from the same manufacturers, there is little
real difference in the functional performance of most similarly equipped computers.
Computers are made from a relatively small list of components. At the heart of a computer is the
motherboarda circuit board that holds the essential electronics of the computer. These include the
microprocessor or central processing unit (CPU), memory chips, the program needed to start the computer,
connections for add-on features like sound and video, and the circuitry known as the bus, which
transmits information to and from the processor.
Most vendors of computer hardware buy motherboards already assembled. From there, they add a source
of power, cables, disk drives, and a case to house them alleach usually sourced from outside as well. A
keyboard, mouse, and display screen, also sourced externally, usually accompany the computer. The hard
drive is the primary PC storage medium. IBM developed the first hard disk in 1956, but Seagate Technology
LLC introduced the first hard disk for PCs in 1979.
Many of the most recognized computer hardware vendors, including Dell Inc., Apple Inc. (formerly Apple
Computer Inc.), and Hewlett-Packard Co. (HP), assemble various components and market them to
customers. Very few assemblers manufacture the microprocessors and other chips that actually make a
computer work, and even these companies have begun to purchase motherboards and other components
from third-party sources for their low-end PCs and servers.
Of course, relying on outside suppliers for crucial parts involves risk. Potential issues include defective parts,
shortages, price increases, and reduced control over delivery schedules. Notably, Intel supplies about 85%
to 90% of the microprocessors used in PCs, giving it enormous power over assemblers. Any or all of these
factors can be significant to an assemblers profitability.
Computer assemblers and component manufacturers are often referred to as original equipment
manufacturers (OEMs). While many assemblers are not true manufacturers, they are grouped as such in order
to differentiate them as wholesale buyers that are distinct from the retail market for computer components.
DISTRIBUTION: DIRECT, INDIRECT, OR BOTH
As computer technology has grown to permeate almost every area of the global economy, the number of
distribution channels has expanded to meet the needs of buyers. Hardware vendors may use one or many
different channels, including a direct sales force. The narrowing of profit margins in late 2000 through 2002
made hardware vendors much more aware of their distribution channels and more interested in improving
their efficiency.

The most expensive and powerful computers are usually sold directly to the end user. These large systems,
which cost $1 million or more, are often specially configured for specific computing tasks and for optimal
integration with the customers existing computing infrastructure. Large-system vendors employ sales teams
organized by industry or geography, or sometimes both. Field service engineers, other service personnel, and
administrators support these sales operations.
Dells direct model differs from the direct sales of large systems, in that it operates at the consumer level and
relies on Internet and telephone sales rather than sales representatives who call on customers and negotiate
specific purchases. Dell uses advertising and other marketing methods to draw consumers to the companys
website and 800 numbers.
Although Dell focused exclusively on its direct sales channel until the past few years, the overall market has
seen expanding methods of distribution. As computers have become more affordable and more standardized,
the number of computer resellers has expanded greatly. Many of these sales outlets offer access to a great deal
of technical expertise and can help the customer design complicated computing systems that integrate
hardware and software from a variety of sources. These businesses are often known as value-added resellers
(VARs), or system integrators (SIs). Value-added resellers use software that is developed internally or by a
third party to create a system integrating hardware, software, and services. For example, Sun Microsystems
typically got about two-thirds of its revenue from reseller channels, and while that proportion probably held
true in 2009, its future sales patterns will be determined by the team at Oracle.
Achieving the proper balance between direct and indirect sales initiatives can be problematic. Direct sales
can lower costs, but maintaining a strong partnership with distributors is critical to computer hardware
vendors serving the enterprise market. In addition, sales of PCs through retail outletsincluding
manufacturers retail locations as well as mass merchandisers, consumer electronics retailers, computer
superstores, warehouse clubs, and office products storeshave accelerated as consumer purchases have
accounted for a growing percentage of PC sales. Growth in this area has come at the expense of other
distribution channels.
FASTER, SMALLER, BETTER
Contract manufacturing is one way that computer hardware vendors handle the perilously short product life
cycle for computers. For many of the industrys best selling products, particularly desktop and laptop PCs, it
often seems that no sooner has a new product hit the market than a newer, faster, and smaller version emerges
to take its place. Making the most of new product introductions is critical: some industry analysts estimate
that as much as 50% of a products profits are generated during the first three to six months of sales.
One of the driving forces behind the short life cycles of PCs has been Intels practice of regularly introducing
new products with faster processing speeds and new features, while cutting prices on older product lines. This
forces competitors, such as Advanced Micro Devices Inc., to cut prices as well, and leads PC vendors to slash
prices on their now outmoded inventory. Other features drive product life cycles as well. The replacement of
the floppy disk by the compact disc as a means of removable data storage drove sales of thousands of new
PCs. Before that, color monitors were an important feature that drove a wave of new purchases.
Another phenomenon related to product lifecycle is the upgrade cycle. During most of the 1990s,
corporations would routinely upgrade their desktop and laptop computers every three years or less, as
processing speeds increased and new software programs (especially new operating systems) required greater
storage capacity and memory. Coupled with the underlying economic expansion, these upgrades drove
enormous growth in PC demand.
Helping to drive the upgrade cycle was the periodic appearance of a new and transformative application for
the PC, known within the industry as a killer app, which required more processing power, larger memory,
or new features. Among the earliest killer apps were word processing and spreadsheets. In the mid- to late
1990s, Internet access was the latest killer app, driving a new round of PC upgrades as millions of
consumers bought new PCs that enabled them to surf the Internet, send e-mail, and place orders online.

The last major upgrade cycle took place in 1999, as consumers rushed to buy PCs that were free of the
millennium bug. Since that time, there has been no major upgrade cycle, though some view the double-
digit growth during 2003, 2005, 2007 and 2010 as reflecting muted upgrade cycles (i.e., unit growth never
exceeded 20%, as was typical of earlier cycles). As a result, industry analysts are now debating whether the
upgrade cycle has been lengthened or has disappeared altogether. Timing of any future upgrade cycle may
depend largely on the emergence of a new killer app that would drive demand.
SEASONAL SALES CAN MAKE OR BREAK THE YEAR
Computer hardware manufacturers face a variety of seasonal influences on their sales. These factors include
differences in customs and business practices in other parts of the world, the retail cycle for home PCs, and
the year-end sales push for corporate hardware.
For large-system vendors, the fourth quarter is traditionally the most significant revenue and earnings
period. This is due to a number of factors. First, because most businesses close their books in December,
managers often seek to deplete their capital spending budgets for fear of funding cutbacks the following
year. Second, vendors often put significant financial incentives in place to spur the industrys legions of sales
representatives to meet year-end sales goals. The fear of forfeiting large cash bonuses usually results in a
sales surge during the fourth quarter.
With PC shipments to consumers accounting for a number approaching half of the worldwide total, the
consumer market also plays a role in the seasonality of the hardware industry. PC manufacturers now focus
on gearing up for the back-to-school selling season and the later push for holiday purchases. Most PC
vendors make substantial advertising and marketing outlays during the third and fourth quarters to
capitalize on these important seasons.
In addition, many US-based computer hardware vendors derive more than 40% of their revenues from
international markets. This has a significant seasonal impact on PC sales as well. For example, European
businesses typically experience a summer slowdown in business activity. Most vendors have adjusted their
business models and expectations to reflect the longer sales cycles and uneven demand patterns during the
summer period in Europe.
DEMAND FOR DATA STORAGE EXPLODING
Over the past several years, the volume of data being created has exploded. We attribute this to the
expansion of a variety of data-intensive applications (including online transactions), multimedia devices,
and, particularly, multimedia content on the Internet. For example, trillions of e-mails are generated on an
annual basis. The growth in the number of instant messages and Web logs (or blogs) has only added to this
phenomenon. As a result, fast and reliable data storage has become ever more vital.
This explosion of data has increased the complexity involved in managing secure access to information,
leading to increased emphasis on storage software solutions. Environmental concerns also have become a
key economic driver, with storage vendors addressing ways in which they can reduce the energy
requirements of data centers by making storage more efficient.
PRODUCT OVERVIEW
The computer storage industry is a broad and dynamic market. Our discussion focuses on the following
categories: storage systems, software, components (host bus adapters and switches), disk drives, flash
memory, and tape products.
Disk storage systems
The storage systems market is broad. Products in this arena serve the entire market spectrum, from low-end
applications up to and including the enterprise segment. These systems are used for a variety of functions,
including the storing, backup, prioritization, management, and disposal of critical pieces of information.
According to IDC, leading providers of worldwide disk storage systems include EMC Corp. (which

accounted for 31.3% of the market in the second quarter of 2013), Net App (13.3%), IBM (12.6%), HP
(10%), Dell (7.6%), and Hitachi (7.1%).
A growing portion of the systems market is focused on devices that are networked, rather than attached
directly to a server. Networked devices may be based on storage area network (SAN) architecture or
network-attached storage (NAS) architecture (both described above). Certain operating environments use
both technologies, making them complementary storage solutions. Within the total external disk storage
market (NAS and SAN combined), EMC garnered a 30.6% share in the third quarter of 2013, followed by
NetApp (13%), IBM (11.4%), and HP (9.5%).
Storage area network. SAN architecture involves the creation of a private network that moves data in
block format directly to servers. The storage area network exists as a complementary network to the local
area network (LAN): the creation of the SAN allows the LAN to offload some of its data-intensive traffic,
thereby improving overall performance and creating a central hub for storage management.
Network-attached storage. NAS architecture is attached directly to the network through a high-end
server. A NAS setup converts the block data to files and delivers them over a LAN to servers or PCs.
Software
In recent years, software has become an increasingly relevant offering for storage vendors. Many companies
have looked to software to supplement their existing product lines. Software has numerous advantages over
hardware, including less labor-intensive manufacturing and higher gross margin potential. Intuitively, the
move to distribute software makes sense. Customers that are interested in purchasing a particular hardware
product often need software to run the necessary applications. A storage company that develops its own
hardware/software solution can seize the opportunity to satisfy all of the customers requirements.
Hardware providers have incorporated the open system conceptconfiguring their software so it can run
on other companies machinesinto their software portfolios. In the past, they typically required customers
to purchase both the storage hardware and software in a bundled package, meaning the customer had to use
the same vendor for both. Today, a customer that wants to use EMCs hardware has the option to use
another companys storage software if it chooses.
According to a report by IDC, the top providers of storage software in the second quarter of 2013 were
EMC (25.6% market share), IBM (16%), Symantec (14.8%), and NetApp (8.7%).
Components
Components are parts used in the configuration of networked storage architectures. The two main
categories within this field are host bus adapters (HBAs) and switches.
Host bus adapters. HBAs are cards that fit into a computer, server, or mainframe and are linked to a
storage device or storage network to allow servers to connect to storage networks. The two principal
competitors in this industry segment are Emulex Corp. and QLogic Corp., which combined control more
than 80% of the market, according to our estimates.
Switches. Switches are devices that filter packets of information between LAN segments. There are two
primary types: fabric and director class. Fabric switches typically provide fewer than 32 ports and are
deployed at the edge of a SAN. Director-class switches offer 32 or more ports and are installed within the
SAN. The two major providers in this field are Brocade Communications Systems Inc. (including acquired
McData Corp.) and Cisco Systems Inc.
Switches and HBAs both use a networking technology known as Fibre Channel, which facilitates the
transmission of data between computer devices. Introduced in 1994, Fibre Channel was the first networking
technology to be widely adopted by the major industry participants. It typically transmits data at speeds of
up to four gigabits per second. Of late, the Internet small computer interface (iSCSI) protocol is becoming
increasingly popular as a SAN interconnect technology. From a host storage interface perspective, iSCSI

tends to be less expensive. Fibre Channel, on the other hand, provides more flexibility in terms of distance,
flexible topologies, and the number of devices and servers that can be attached.
Hard disk drives
Despite their multitude of uses, all hard disk drives (HDDs) employ the same basic technology. One or more
hard disks are attached to a spindle assembly, which is powered by a spindle motor that rotates the disks at
a constant speed around a hub. The disks are the sites at which data are retrieved and stored. Drive sizes
range from 0.85 inches to 3.5 inches, depending on the application.
Demand for hard disk drives is influenced by a number of factors, including improvements in computing
price-to-performance ratios, the digitization of printed information, the increase in file sizes, growth in
emerging economies, and expansion of this technology into consumer electronics equipment. HDD
performance is often measured in terms of aerial density, which is the storage capacity per square inch on
the recording surface of a disk.
Consolidation over the last few years has caused the disk drive industry to become more concentrated.
According to our estimates, the major worldwide providers of HDDs in 2013 included Western Digital
Corp. (45% of total shipments) and Seagate Technology (40%).
Storage capacity can vary widely, depending on the product offering and end market being served, and it
has increased greatly since mid-2006. New technologies, like perpendicular magnetic recording (PMR), are
responsible for increasing drive capacities. Technological innovation has also reduced the number of
components used in making HDDs, which significantly lowers their cost and increases their reliability.
Flash memory/solid state drives
Other products receiving more attention today are devices based on flash memory technologya type of
nonvolatile memory in which the memory pattern is erased by very large arrays of bytes. There are two
main kinds of flash memory. The first is NAND, which primarily is used for storing large quantities of data.
The second, NOR, offers faster read speeds and is more suitable for applications such as cellular phones.
Because flash memory has been incorporated into a host of consumer-related products, it has broadened the
storage industrys addressable market.
In January 2009, SanDisk Corp. announced the availability of a 240 GB solid-state drive (SSD) for PCs.
Compared with conventional platter HDD technology, the SSD has no moving parts and consumes less
power. As a result, SSDs allow laptop battery charges to last longer and the laptop batterys useful life to be
extended (due to fewer charging cycles and the longer intervals between recharges).
Because SSDs are based on flash memory technology, they provide faster access times and generate less
heatboth of which are seen as differentiating advantages. We believe that recent pricing declines have now
made SSDs a serious threat to conventional HDDs.
Tape products
Tape-based storage is another option for customers in need of information management solutions. This
process involves reading data and then writing the data onto tape. Tape-based storage tends to be used for
data that are less relevant to the ongoing operations of a business and need to be accessed infrequently.
Tape storage is sometimes combined with a disk-based backup system to provide an additional layer of
protection and replication. The advantage to using tape is that it is typically less expensive and more energy
efficient than disk storage. On the down side, tapes speed and functionality, while improving, are generally
not as robust as those of similar disk-based products.
OPERATIONAL FACTORS
The operations of a data storage company are influenced by a variety of factors. The following section
details what we believe are some of the most important considerations for firms in this industry.

Production requirements
Successful companies in the storage industry must make significant investments in components, equipment,
people, and real estate. They may manufacture their products internally or by outsourcing, and they can
operate in locations throughout the world, depending on the costs, customer requirements, and supply chain
logistics. Asia has become a particularly attractive manufacturing location, with its growing economies,
lower labor and materials costs, tax incentives, and well-educated work force.
Given the complex nature of data storage products, companies must hire workers with highly specialized
backgrounds and skill sets in order to develop state-of-the-art offerings and stay competitive. Company
research teams are usually characterized by an abundance of engineers, many of whom possess PhDs. In
addition, companies typically offer ongoing training to ensure that employees stay abreast of current
marketplace trends.
Customer base
Customers for data storage equipment represent a broad spectrum of vertical markets. While the ability to
access vital statistics in a timely manner is a key component for most organizations, some of the major end
markets served include the financial, manufacturing, and medical sectors. The terrorist attacks in September
2001 galvanized these businesses to evaluate their ability to protect, copy, store, and retrieve information.
Traditionally, many of the larger storage providers have focused their resources on the so-called enterprise
market: large organizations, such as corporations and government agencies. Products for this market offer
massive amounts of capacity, as well as state-of-the-art capabilities with respect to efficiency, reliability, and
speed, and can cost as much as several hundred thousand dollars. More recently, the industry has enhanced
its focus on the middle and lower tiers of the market by presenting products that offer many of the same
high-end features, but at a fraction of the price. This shift has greatly expanded the overall addressable
storage sector.
Competition
A variety of factors influence the competitive landscape of the data storage industry. From evolving
technologies, to pricing pressures, to research and development (R&D), the sector is in a state of perpetual
motion. For these reasons, size matters, and the industrys entry barriers are high.
Scale. Despite inherent differences, the industrys product segments have many similarities in terms of
competition. First, size matters. The leading companies are able to meet the changing needs of their
customers, given the breadth of their product lines and devotion to investing in R&D. The biggest firms
have the ability to initiate and/or weather price reductions because of their more efficient operating
structures. These manufacturing efficiencies are attributable not only to economies of scale, but also to cost-
reduction initiatives implemented after the bursting of the Internet bubble.
Barriers to entry. The data storage industry has high barriers to entry. The level of technical expertise
required and the amount of money that must be allocated toward R&D make it exceedingly difficult for
new entrants to gain traction in this market. In addition, established companies typically have experienced
management teams who can develop successful business strategies and stave off upstart companies. Many
existing companies have developed multiple patents in order to protect their intellectual property.
Pricing trends
Products with prices that decline fairly rapidly characterize the data storage industry. The price of disk
storage systems typically decreases by about 30% per year, but this level can be higher depending on
supply/demand imbalances, new product introductions, and individual company strategies.
During the market downturn in 2000 and 2001, price competition grew vicious in many parts of the storage
sector as demand evaporated with very little warning. Companies were forced to offer their products at
drastic discounts in order to stimulate customer interest. This defensive strategy eroded profitability by
pressuring gross margins. Proactive companies were able to offset some of this shortfall, though, by
implementing major cost-reduction efforts and lowering corporate operating expenses. While the severity of

price discounting has largely subsided, there are still pockets of the industry that are experiencing intense
pricing battles.
In the past, makers of HDDs tended to experience more abrupt price swings than other areas of the storage
market, in our estimation. We believe this resulted from the difficulty in anticipating near-term demand and
the limited lead times often associated with the production process.
An illustrative example occurred in early 2004. Anticipating a strong holiday selling season, disk drive
companies had ramped up production late in 2003. Demand levels did not materialize as expected, however,
creating a supply imbalance in the marketplace. To make matters worse, demand tapered off in the succeeding
months, due to the normal seasonal factors. With excess supply weighing on the sector, the disk drive
companies engaged in price discounting in an effort to derive some value from their excess inventory.
Product cycles
The ability to determine the life cycle of a particular product is a key management consideration. If a product is
allowed to stay in the marketplace for an excessive period, the company risks declining revenues and the ceding
of market share to peers with more formidable offerings. At the same time, pulling a product too quickly in favor
of an updated version may result in unnecessary expenses and the cannibalization of a companys wares.
Product cycle times can vary from just a few months to several years, depending on the level of competition,
companies emphasis on R&D, and consumer demand. Customers tend to watch these cycles closely: if they
are interested in purchasing a new storage device, but expect an updated version to be released soon, they
may decide to wait in order to take advantage of the newer offering.
Distribution and alliances
Storage systems and components are sold through multiple outlets, including directly to original equipment
manufacturers and through various partner and channel relationships. In most instances, partnerships create
winwin opportunities for the affiliated companies. One example is the ongoing relationship between
EMC and Dell. Their agreement involves joint product manufacturing, marketing, and collaboration on
product design and technologies. EMC has been able to take advantage of Dells world-renowned production
capabilities and to expand its global reach by leveraging Dells customer base. In turn, Dell has been able to
build out its storage product portfolio by relying on EMCs broad experience and technical expertise.
Inventory
Inventory levels are an important consideration when determining product demand and the success of a
companys sales strategies. There is considerable risk in shipping too many products based on the
assumption that demand is likely to improve in the near term. If a company or one of its channel partners
incorrectly forecasts demand trends, it may have to cut prices in order to stimulate purchases and to reduce
product levels to avoid obsolescence. Conversely, keeping inventory levels too low can result in missed
opportunities, should demand patterns exceed expectations.
KEY INDUSTRY RATIOS AND STATISTICS
IT spending. This category concerns the amount of money allocated to initiatives related to information
technology (IT) on a worldwide basis, over the course of the year. Projected and actual data are broken out
by vertical market and individual product line and are reported by IDC, a research firm specializing in the
IT and communications industries.
This statistic may give the best indication of demand for storage products, which fall under the IT spending
umbrella. These data points also indicate the overall attitude of corporations toward spending on IT-related
products and services: a rising forecast generally indicates greater business confidence, and vice versa.
According to the latest available statistics from Gartner Inc., an IT research firm, worldwide IT spending
should rise about 3.1% in 2014 compared with an increase of 0.4% for 2013.

PC shipment forecast. Reported on a quarterly basis by IDC, this metric measures the number of PCs
that manufacturers expect to ship on a worldwide basis during the year. IDC also provides projections by
individual regions and for future periods. The PC shipment forecast offers a good barometer as to the
overall level of demand for IT products. It is particularly relevant to the hard disk drive segment of the
industry, since hard disk drives are installed inside PCs.
According to the latest data from IDC, the number of worldwide PC units fell by 10% in 2013, following a
decline of 4% in 2012 and an increase of 1.6% in 2011. IDC forecasts unit shipments to fall an additional
3.8% in 2014.
External disk storage systems revenue and market share data. These statistics track the performance of
the disk storage systems portion of the data storage market. The data are compiled by IDC and published
on a quarterly basis. These data points describe how this subsector of the data storage market performed
during the quarter and give an indication of the strength of underlying demand trends. In addition, the data
show which companies were able to gain or lose market share.
EMC Corp. maintained its lead in the external disk storage systems market in the third quarter of 2013,
with 30.6% revenue share, according to IDC. Other key companies include NetApp with 13% share,
International Business Machines Corp. (IBM) with 11.4%, and Hewlett-Packard Co. (HP) with 9.5%.
Consumer confidence. Consumer spending accounts for only about 10% of total IT spending directly,
but it is also an important factor for the computer industry on an indirect basis. First, consumer confidence
is an important element in corporate profitability, which in turn drives business capital spending. In
addition, as PC penetration in the home increases, businesses must invest more in their IT infrastructure to
handle increasing demand for e-commerce transactions and other high-tech services.
A high level of consumer confidence generally signals that people feel good about the economy, their job
prospects, and future earnings ability. High or rising confidence is usually accompanied by increased
spending and borrowingnecessary ingredients for the purchase of relatively big-ticket items like PCs.
Conversely, when consumer confidence is low, people are more likely to postpone nonessential outlays.
The Conference Board conducts the most widely followed consumer confidence survey. It polls 5,000
representative households each month to gauge consumer sentiment. This measure of consumer attitudes is
expressed as an index, with 1985 as a base year (1985=100). This index stood at 82.3 in March 2014 (up
from 78.3 in the previous month).
Real growth in gross domestic product (GDP). GDP, the broadest measure of aggregate economic
activity, is the market value of all goods and services produced by labor and capital in the US and is
reported quarterly by the US Department of Commerce. Growth in the economy is measured by changes in
inflation-adjusted (or real) GDP. Real GDP grew by 1.9% in 2013. As of March 2014, Standard & Poors
Economics (which operates separately from S&P Capital IQ) was projecting real GDP growth of 2.8% in
2014.
Currency exchange rates. The multinational nature of the computer hardware industry means that the
value of the dollar, compared with that of other currencies, is of great importance. Companies like IBM,
Dell Inc., and HP generate a significant proportion of their sales and profits from outside the US and thus
are affected by changes in the dollars value versus other currencies. For example, revenues transferred from
IBMs Japanese subsidiary to the US-based parent are hurt when the dollar strengthens against the yen.
Conversely, those revenues will increase when the dollar weakens compared with the yen.
For US computer hardware companies that have a significant operating presence in international markets,
currency swings also affect the expense side of their ledgers. The increasing level of global exposure often
causes wide variations in these companies reported results. To limit the financial risk associated with currency
swings, companies are increasing their use of hedging techniques, which have helped them limit foreign
currency impacts on financial results. Still, it is important to understand both the net impact of currency
swings on reported financial statements and the true level of business activity on a constant currency basis.

HOW TO ANALYZE A TECHNOLOGY HARDWARE COMPANY
Rapid technological changes make it imperative for analysts and investors to go beyond traditional
quantitative methods in assessing a computer hardware companys outlook. To be sure, financial statement
analysis is a critical ingredient in determining the future prospects of any company. However, qualitative
judgments must also be made about technology, competition, business and marketing strategies, and the
credibility and potential of a companys management team, as well as prospects for the industry as a whole.
Analysis of the quantitative and qualitative aspects of a computer hardware company should be considered
within the context of the omnipresent threats and opportunities posed by new technology. Again, rapid
changes are key characteristics of the industry, and how well a company manages this variable can determine
whether it emerges as an industry leader, becomes a second- or third-tier player, or fails to make the grade.
The history of the computer industry contains vivid examples of companies with dominant franchises that
failed to keep up with technological shifts away from their core markets. Apple Inc., Digital Equipment
Corp. (DEC), and International Business Machines Corp. (IBM) all dominated key segments of the
computer hardware industry, only to see their positions deteriorate as the market shifted toward faster,
cheaper, and more functional products. Their declining positions eventually showed up on the companies
financial statements, but an analyst attuned to industry dynamics would have been alerted by earlier clues.
We note that Apple and IBM, with the benefit of keen management and a renewed focus on core
competencies have improved their financials markedly over the past decade.
More recently, as networked computing has become ubiquitous, computing environments have become
more complex. Increasingly, customers rely on their hardware vendors to provide consulting and support
services. Therefore, in assessing the competitive stance of a hardware vendor, an analyst should evaluate the
companys services capabilities and its strategy for the future in this area.
Knowledge of general economic conditions affecting business in general and the computer industry in
particular is essential in determining conditions within the data storage industry. (Several of these areas are
discussed in the Key Industry Ratios and Statistics section of this Survey; long-term industry-specific
trends are featured in the Industry Trends section.) A key indicator within the overall economic picture is
the level of spending by enterprise customers, which determines the near-term flow of dollars to the storage
industry. To assess an individual companys situation within this environment, it is important to consider
both qualitative and quantitative factors affecting its condition, as detailed below.
COMPARATIVE ANALYSIS IS CRITICAL
An analyst must identify a companys competitive advantagesand its disadvantages. What are the
companys key products and markets, and how does it differentiate itself from its peers? How does its
current strategy compare with its plans for the future, and how do they both compare with the strategies of
competitors? Has management been able to articulate strategy, and does its past performance indicate it will
be successful in executing its plans? Does the company have an edge over its competitors? If so, is it likely to
maintain that edge?
In most industries, product differentiation is one strategy companies use to achieve a competitive advantage
over peers; in the personal computer (PC) industry, however, it has meant relatively little. Most PCs are
based on an Intel Corp. microprocessor and Microsoft Corp. software, so there is little in the way of
product differentiation. For laptops, weight and battery life are design factors that can create some
differentiation. Broadly speaking, however, PCs are viewed as commodity-like because of a lack of product
differentiation, so price becomes the key differentiator. Quality, reliability, and the level of service and
support also play key roles, partly because these factors affect the total cost of ownership of a computer.
Ultimately, market forces will determine the relative importance of considerations other than price. An
analyst needs to understand how each company has positioned itself concerning these factors and whether
the strategy makes sense, given the trend seen for overall market demand.

Peer comparisons
An important consideration when looking at relative valuation measuressuch as price to earnings (P/E),
price to sales (P/S), or any other metric that involves comparing a company with its peersit is important to
find the best like-for-like comparison. In order to ascribe a multiple based on relative valuation to a
particular vendor in the storage group, it is important to consider the makeup of its revenue and earnings,
and decide which of its peers compare most closely. Barring major structural or fundamental differences,
companies with the same product focus and addressing common target markets tend to be valued similarly.
Growth is relative
How does a companys financial performance compare with others in its peer group? Again, while absolute
numbers are an important part of the financial assessment of any company, comparing performance and
financial ratios with those of its peers is critical. For example, it is clearly a cause for concern if a company
achieved revenue growth of 5% in a year in which the average industry growth rate was 10%. Why did the
company underperform? Similarly, if a companys growth outpaces the average, analysts will want to
uncover the reasons. Is that above-average growth rate sustainable?
The next step is to consider the growth rate for the particular industry segments in which the company
participates. The outlook for mainframe computers, for example, differs from the higher growth prospects
for PCs and servers.
Finally, the financial results of a company should always be considered within the context of the markets it
serves. Does the company primarily serve the consumer or corporate market for PCs? In which geographic
areas does it participate? What is the companys growth relative to its competition in these geographic areas
and the markets overall growth potential? A companys geographic footprint can affect its effective tax
rate, as well as revenue potential and production cost levels; tax rates typically head lower as more
operations occur outside the United States.
QUANTITATIVE ANALYSIS: LOOKING AT FINANCIAL STATEMENTS
Analyzing a companys principal financial documentsthe income statement and the balance sheet
provides an important base for assessing its overall performance.
An analyst can gauge the fundamental strength of a storage vendor by identifying the markets in which it
competes and understanding their dynamics. What are the overall growth expectations for those markets? It
is also important to determine the level of competition in a companys particular market segments. Who are
its major competitors? Are there many small competitors or a few large firms wielding significant resources?
How does the company stack up against them, and what are its particular advantages? One possible
advantage is size; another might be the overall breadth of its product line.
The ability to adapt quickly to technological change is another key factor. As faster and more efficient
products pique the interest of customers, it is critical that a company respond proactively to deliver those
products in a timely manner. Companies that are unable to do so risk losing market share and may face
additional expenses related to obsolete inventory. Somewhat related to technological change is the effect of
regulatory issues placed on the business needs of the customer base. More specifically, absent a standard or
technical specification, vendors within the industry can often differentiate themselves from competitors by
their approach to satisfying storage-related compliance issues.
A further qualitative point to research is management ability. Clues about a companys management team
can be obtained by looking at its history. What is its track record? How long have the high-ranking
managers been with the company? If they recently took control, what have they done previously? It is also
preferable for managers to own stock or options in the company. This helps to ensure that they have the
incentive to do what is best for the shareholdersthat is, to create shareholder value.

Key elements on the income statement
A companys income statement shows its operating results over a specific period and thus is a key part of
any analytical endeavor. An analyst should determine the components and trends of a companys profits,
then compare these results with those of its competitors.
Sales trends. Beginning at the top of the income statement, analysts should look at short-term and long-
term growth trends in revenues. Ideally, sales in the current period should show growth from the year-
earlier period. Moreover, if the company participates in a high-growth industry, or if it is in the early stage
of a new product cycle, sequential growth (from one quarter to the next) would be expected, though
seasonal factors should also be considered. In addition, sales growth should be compared with that of direct
competitors and against the overall industry rate. Revenues derived by data storage vendors tend to follow a
seasonal pattern, in which the last quarter of the calendar year is often the strongest. We believe this is
largely the result of corporate information technology (IT) departments accelerating their level of spending
late in the year in order to use up allotted fundsa process often referred to as a budget flush.
Gross profit margin. This is arguably one of the most important profitability measures to consider in
assessing a computer hardware company. Gross margins (the percentage of sales remaining after subtracting
the cost of goods sold or costs such as materials, labor, and overhead) can be affected by a number of
variables, including sales mix, sales volumes, pricing pressures, and component costs.
Significant gross margin pressure has been the norm in the computer hardware industry in recent years, as
pricing competition has intensified. Successful companies have been able to counter margin pressure
somewhat by adding a higher-margin mix of products, improving their manufacturing efficiency, and
maintaining lean inventory levels.
In the data storage industry, gross margin (total revenues minus the cost of goods and services provided,
divided by total revenues) varies widely. Gross margin can range from less than 20% for certain hard disk
drive manufacturers to 60% or more for some host bus adapter (HBA) providers, and more than 80% for
software vendors. A drop in gross margin may reveal that a vendor has changed its bidding policies to use
price as a competitive weapon to win contracts. Although price cuts reduce a contracts profitability, they
often increase the companys overall business volume.
Expense line items. These include selling, general, and administrative (SG&A) costs, and research and
development (R&D) costs, which should be evaluated relative to industry norms. Ideally, expenses should
increase more slowly than sales. However, technology companies with high growth prospects sometimes
must expand their workforce rapidly to support sales growth and/or new product development. In such
years, their expenses can rise faster than sales.
Net profit margin. This is the bottom line and is calculated as net income divided by total sales. Along with
operating performance, it reflects a companys taxes and its nonoperating income and expense items, such as
interest income and interest expense. As many companies have reduced debt levels and improved operating
efficiencies, net profit margins have improved in recent periods.
Balance sheet provides clues to future results
How strong is a companys financial position? The balance sheet offers a snapshot of the companys
financial position at a specific moment in time. Some factors to study include the ratio of long-term debt to
capital, current assets, the current ratio, inventories, and accounts receivable.
The ratio of long-term debt to capital. Long-term debt as a percentage of total capital varies widely
among computer makers, but most established companies target a ratio of 30% or less. Low debt levels give
a company the financial flexibility to acquire emerging technologies or other technology companies, and
minimize interest expense.
Cash and investments. This metric indicates a companys ability to meet near-term debt obligations,
make acquisitions, repurchase stock, and/or pay dividends. This line item has become more of a focal point

in recent years, as many data storage vendors have looked to expand their product lines by making strategic
acquisitions.
Current assets. Also important in the analysis of a technology company is a careful examination of
current assets. Is the company headed for a potential cash crunch? The level of cash and marketable
securities is usually a good starting point for assessing a companys short-term liquidity. Because the
computer hardware industry is subject to wide swings in profitability, most companies require a reasonable
level of cash and cash equivalents for emergency liquidity and growth needs. The proper level will vary from
company to company, but a good rule of thumb is for cash to equal 10% of total assets.
The current ratio. Another check on liquidity is the current ratio (the ratio of current assets to current
liabilities), also called the working capital ratio. A healthy working capital ratio helps to ensure that the
company can adequately meet its current liabilities; this ratio should be greater than one. Any meaningful
degradation in the current ratio from previous reporting periods should be closely examined.
Inventories. Given the computer hardware industrys tendencies toward rapid price declines and
inventory obsolescence, the level and health of a companys inventory position must be constantly
monitored. When inventory levels increase faster than the rate of sales growth, it can signal either potential
opportunity or potential trouble. For example, it may be that the company is gearing up for heightened
business activity, such as in the early stages of a new product cycle. Alternatively, it could be a red flag
signaling that existing products are not selling well.
How fast is the company turning over its inventory? This is a critical question companies are increasingly
asking themselves on two levels: as a clue to manufacturing efficiency and as a tool for cash-management
optimization. Product sitting on a shelf in a warehouse ties up assets that could be better deployed (e.g., put
toward investments in future growth). A key measure to watch is the inventory turnover ratio (the annualized
cost of goods sold divided by the value of average inventory), which measures the average speed at which
inventories move to sales. Any meaningful change in inventories or turnover rates should be investigated.
Deferred revenue. This metric encompasses revenue that has been received by the company for work that
it has not yet performed. Such revenue is classified as a liability on the balance sheet until the product or
service is provided to the customer. We believe that this category is useful to investors, as it offers a peek
into a companys revenue potential.
Accounts receivable. An analysis of accounts receivable can provide insight into how well a companys
products are selling. A rise in the level of accounts receivable may indicate that a significant portion of sales
was made in the last few weeks of the quarter. Although many technology companies experience this type of
sales trend (sometimes described as a hockey stick), it could signal that price concessions or generous
payment terms had to be extended to pump up sales. However, as the computer hardware industry becomes
more global, accounts receivable could generally trend higher as a matter of logistics. One way to track
accounts receivable is by measuring the days sales outstanding (DSOs). Simply divide accounts receivable
by sales for a given quarter and multiply by 91.
Free cash flow
When valuing a data storage firm, an important measure is free cash flowthe amount of excess cash the
company has available after paying off its obligations. The analyst should determine how the company
expects to use its free cash flow. Possible strategies include repurchasing shares of the companys common
stock, paying dividends to shareholders, reinvesting the cash in the business, or pursuing acquisitions.
Generally, a company in a growth stage will pump its cash back into the business to fuel further growth.
Mature companies that do not earn a high enough return on their invested capital may elect to pay out the
cash to their shareholders through dividends or share repurchases.
Performance and valuation metrics to consider
Drawing from both the income statement and the balance sheet, two important measures of a companys
overall financial performance are return on assets and return on equity. These measures, along with growth
projections, provide key indicators for a valuation analysis.

In evaluating the relative attractiveness of a companys current stock price, performance metrics and growth
rates should be considered alongside price-related valuation ratios such as price/earnings, price/sales, and
price/cash flow. The analyst should compare valuation ratios with the companys own historical ratios and
with those of peer companies and the overall stock market.
ROA and ROE. Any financial statement analysis would be incomplete without some discussion of return
on investment, of which the two most popular measures are return on assets (ROA) and return on equity
(ROE). ROA (net income divided by average total assets) measures a companys operating efficiency or the
return earned on assets under managements discretion. ROE (net income divided by average total
shareholders equity) measures the return earned on shareholders capital. Both ratios measure managements
ability to earn a reasonable profit on the assets and capital entrusted to them.
IBM struggled with these metrics in the early 1990s as customers transitioned away from the old-style
mainframe platform to the more popular PC, and the company posted losses through 1993. Since then,
newer IBM products and a strategy that emphasized higher growth opportunities in software and services
have generated steady improvement in the companys ROA and ROE measures. From $2.5 billion in 1994,
IBMs earnings increased to about $16.48 billion in 2013, while its ROA improved from 3.7% to 13%. Its
ROE expanded from 14.3% to 83.8% during the same period.
P/E and PEG. The term P/E refers to the price-to-earnings ratio of a stock. To arrive at this figure, simply
take the stock price and divide by the current years projected earnings. For a forward projection, one can use
the forecasted earnings for the next year. A variation of this ratio, which can be used to weigh the strength of
earnings growth as part of valuation assessments for a given company relative to its peers, is referred to as the
PEG ratio, or the P/E divided by the companys projected average five-year earnings growth rate.
In our view, when the economic environment is relatively stable or on an uptrend, data storage companies
are valued based on their profitability. In this environment, the most common valuation metrics used are
P/E ratio and multiples of operating profits. Although the data storage industry is no longer viewed as a
fast-growing sector, we project that it will outpace the rest of the IT industry and the overall market. Thus,
we estimate that the average P/E ratio for the data storage industry should be above that of the overall
market, reflecting its higher growth potential.
Price/sales. This ratio is derived by dividing the current share price of the company by its projected
revenues for the current year on a per-share basis. This ratio is used in times when earnings are not available
(e.g., the company is operating at a loss), or when earnings forecasts are in question.
Price/cash flow. To calculate this ratio, take the companys stock price, and divide it by the sum of the
current years forecasted cash flow. The most commonly used proxy for a companys cash flow is EBITDA
(earnings before interest, taxes, and depreciation and amortization). The real-world use of this ratio is
generally derived using the forecast of EBITDA for the next year. Price/cash flow is typically used in cases
where a companys earnings are penalized by high capital intensity.

GLOSSARY
Advanced technology attachment (ATA)A standard interface for connecting storage devices such as hard disk drives
inside personal computers.
Aerial densityA measure of storage capacity per square inch on the recording surface of a disk.
Application-specific integrated circuit (ASIC)A microchip created for a specific type of application. ASICs are commonly
used in automotive computers and in personal digital assistants.
Arbitrated loopA configuration of Fibre Channel networks in which multiple devices share a single segment or loop.
ArchitectureThe overall design of the computer; it governs the interrelations between the operating system and the physical
hardware. Intel-compatible computers all have the same architecture, usually referred to as Standard Intel Architecture. Apple
Macintosh computers, IBM mainframes, and Sun servers running Unix each have different architectures. Open architecture
allows other manufacturers to design compatible devices; a closed architecture, in contrast, has a proprietary design.
Blade serverA circuit board containing all the elements of a server that is built to a standardized size for mounting on a rack
or chassis. Blade servers, which are often used to create computer clusters, save space in computer rooms and allow for easy
mounting or removal.
BroadbandA class of Internet connections, including cable modems, digital subscriber lines (DSLs), satellite systems, and Wi-Fi,
that offer higher capacity and faster data transfer speeds than those available through a modem using ordinary telephone lines.
ChannelThe group of distributors and resellers used by an original equipment manufacturer (OEM) to sell its product, as
distinct from sales made directly to end users. Channel partners (i.e., retailers or other marketers) may buy from the OEM directly
or from a distributor.
Client/serverA model of computer networking in which one computer (the server) acts as a central storage area for data and
software programs that can be accessed and manipulated by other computers (the clients, usually PCs or workstations), which
themselves are tied together.
Cloud computingInternet-based computing, whereby shared resources, software, and information are provided to computers
and other devices on demand, like the electricity grid.
ClusteringConnecting two or more computers together in such a way that they behave like a single computer.
CPUCentral processing unit; a computers microprocessor, sometimes called the brains, where calculations and
manipulations take place.
DatabaseA computer-based collection of information or data files, organized and presented to serve a specific purpose.
Direct-attached storage (DAS)Storage devices that are directly connected to a server.
Disk driveAn internal or peripheral device on which data can be stored and retrieved; used in all sizes of computers.
Distributed processingData processing in which some or all of the processing, storage, and control functions, in addition to
the input/output functions, are situated in different places and connected by transmission facilities. The transparent access to
applications and data by programs and users is an important goal of distributed processing systems.
Enterprise system connectivity (ESCON)An IBM fiber-optic connection technology that can support data transfer rates of
up to 200 megabits per second (Mbps).
Fibre ChannelA networking technology used to transmit data between computer devices. It is the primary connection type
used in a storage area network (SAN).

Fibre Channel over EthernetA standard for using the Fibre Channel protocol over Ethernet networks, enabling SAN traffic to
be natively transported over Ethernet networks, while protecting and extending the investment enterprises have made in Fibre
Channel technology.
Fiber connectivity (FICON)An IBM fiber-optic channel technology that extends the capabilities of ESCON. This mainframe
storage protocol uses Fibre Channel hardware and can support data transfer rates of one gigabit per second (Gbps).
FirewallTechnology, either hardware or software, used to separate the publicly accessible areas of a computer network or
Internet site from nonpublic areas and prevent access by unauthorized users.
Flash memoryA type of nonvolatile memory in which the memory pattern is erased by very large arrays of bytes.
Form factorThe physical form in which a computers components are packaged. In the PC market, laptops have recently
overtaken desktop computers as the predominant form factor, and mini-notebooks (also known as netbook computers) are
gaining popularity. Tablet computers, which are positioned between traditional laptops and the smaller, less robust netbooks, are
also seeing new interest.
GBOne gigabyte, or 1,000 megabytes; a unit by which computer memory and data transfer speeds are measured.
Hard disk driveA device that reads and writes data on a hard disk. It is used for information storage and retrieval.
HardwareThe physical components of a computer system, as opposed to the software that makes the system or its
applications run.
Host bus adapter (HBA)A card that fits into a computer, server, or mainframe and is linked to a storage device or storage
network.
HypervisorSometimes referred to as a virtualization manager, a hypervisor is a program that allows multiple operating
systems, which can include different operating systems or multiple versions of the same operating system, to share a single
hardware processor.
Information lifecycle management (ILM)The creation and management of a storage infrastructure and the data that it
maintains. By classifying information into particular categories based on frequency of access and relative importance, it enables
the more efficient management and prioritization of data.
InternetA public network connecting many computer networks and based on a common addressing and communications
system called TCP/IP (transmission control protocol/Internet Protocol). (See World Wide Web.)
Internet Protocol (IP)The set of rules that defines how information is transferred from one computer to another on the
Internet.
Internet small computer systems interface (iSCSI)An Internet Protocol-based standard for linking storage devices over a
network.
IntranetsPrivate networks usually owned by corporations or small businesses, linking computers within an organization to
facilitate the sharing of information. Intranets are accessible only to employees of that organization and other authorized users.
Local area network (LAN)Interconnected workstations sharing the resources of a single processor or server within
relatively close proximity.
LinuxA variant of the Unix operating system that is open source, meaning that users can freely modify it. Linux is
increasingly popular for running corporate servers, but is a lesser force in desktop computing. (See Unix.)
MainframeA large, expensive computer capable of supporting hundreds, or even thousands, of users simultaneously.

MHzMegahertz; a standard measure of frequency oscillation used to identify the clock speed of computer microprocessors,
busses, and interfaces.
MicroprocessorA central processing unit, or CPU, consisting of one or more chips that perform the basic arithmetic, logic,
and control functions that a computer needs to process data.
MultiprocessingRunning two or more programs simultaneously. A multiprocessor contains two or more central processors
under a common control. In contrast to other forms of computing, multiprocessing refers specifically to concurrent instruction
executions.
NetworkA collection of hardware, communications facilities, and software that gives computers access to shared resources
(e.g., databases) and peripheral devices (e.g., printers and modems).
Network-attached storage (NAS)Storage attached directly to the network through a high-end server.
Network virtualizationA method of combining the available resources in a network by splitting up the available bandwidth
into channels, each of which is independent of the others, and each of which can be assigned (or reassigned) to a particular
server or device in real time. The idea is that virtualization disguises the true complexity of the network by separating it into
manageable parts, much like your partitioned hard drive makes it easier to manage your files.
Operating systemSoftware that controls the inner workings of the computer. It performs basic housekeeping chores such as
recognizing input from the keyboard, keeping track of files and directories, and controlling peripheral devices. Most PCs run on
the same operating system, Microsoft Windows, but servers use a variety of different operating systems, including Unix, Linux,
and others, in addition to Windows.
Original design manufacturer (ODM)An emerging class of vendor that performs design functions for the products it
manufactures, which are then marketed and sold by another organization.
Original equipment manufacturer (OEM)In the computer industry, this term usually refers to a vendor that assembles
computer systems with components made by other suppliers.
Parallel processingThe processing of a single program or data stream by dividing it among two or more processors in a
single computer. Parallel processing had been a distinct feature of mainframes, but is now available in some other computers.
ParavirtualizationA virtualization technique where guest operating systems are modified in some way to increase
performance on x86 systems when the operating systems are run in a virtualized environment.
PeripheralsExternal devices attached to a computer; examples include printers, disk drives, display monitors, and keyboards.
RAMRandom access memory; an electronic storage area used by a computer to hold the information it is currently working on.
Data stored in RAM is lost when the flow of electricity stops. RAM can be dynamic (DRAM), which must be refreshed
periodically, or static (SRAM), which does not need refreshing and is faster (but larger and more expensive) than DRAM.
ROMRead-only memory; memory that a user cannot alter. Programs or data stored in ROM do not disappear when the power
is shut off.
Serial advanced technology attachment (serial ATA)A new standard for connecting hard drives into computer systems;
it is based on serial signaling technology.
ServerA computer or a device on a network that manages network resources. For example, a file server is a computer and a
storage device dedicated to storing files; any user on the network can store files on the server. A print server is a computer that
manages one or more printers.
Server virtualizationThe masking of server resources (including the number and identity of individual physical servers,
processors, and operating systems) from server users. The user is spared from having to understand and manage complicated
details of server resources, while increasing resource sharing and utilization and maintaining the capacity to expand later.


SIASStandard Intel Architecture Servers; used to define a class of servers employing Intel or compatible microprocessors, as
distinct from servers built using microprocessors made by IBM, Sun, or others.
Small computer system interface (SCSI)A short-range protocol designed to link host computers with storage devices.
SoftwareComputer programs that either direct the operation of a computer (system software) or accomplish user tasks
(application software).
Solid-state drive (SSD)A storage device that stores persistent data using integrated circuits (ICs) rather than magnetic or
optical media.
Storage area network (SAN)A dedicated network providing storage and backup solutions. The network establishes a
connection between storage devices and the back end of a server.
Storage virtualizationThe pooling of physical storage from multiple network storage devices into what appears to be a single
storage device that is managed from a central console. Storage virtualization is commonly used in storage area networks (SANs).
SwitchesNetwork devices that connect and filter pieces of a message (or packets) between LAN segments.
TCP/IP offload engine (TOE)A technology that optimizes throughput in high-speed Ethernet systems. As communication
speed in Ethernet systems has increased faster than computer processor speed in recent years, it has produced an input/output
(I/O) bottleneck. TOE solves this problem by removing the burden (offloading) from the microprocessor and I/O subsystem. TOE
components are incorporated into one of the printed circuit boards, such as the network interface card (NIC) or the host bus
adapter (HBA).
UnixAn operating system developed by AT&Ts Bell Laboratories that has multiuser, multitasking, and networking
capabilities. (See Linux.)
Value-added reseller (VAR)A vendor that assembles hardware components into a computer system. The vendor adds value
to it by installing software (often customized). The complete package is then sold to the final purchaser.
VirtualizationThe creation of a virtual (rather than actual) version of something, such as an operating system, a server, a
storage device, or network resources.
Virtual memoryA technique that lets a computer treat hard-disk storage as an extension of main memory.
Wi-FiShort for wireless fidelity; refers to a set of wireless communications standards that provide broadband networking
connections over short distances using unregulated radio waves.
WorkstationA single-user system for engineers and other technical professionals; it features a high-performance
microprocessor and graphics capabilities, significant storage capacity, and networking facilities.

INDUSTRY REFERENCES
PERIODICALS
Computerworld
http://www.computerworld.com
Weekly; computer hardware and software news.
CRN
http://www.crn.com
Weekly; computer hardware and software industry news.
InformationWeek
http://www.informationweek.com
Weekly; news and features on the computer hardware and
software industries.
InfoWorld
http://www.infoworld.com
Weekly; covers computer hardware and software.
Investors Business Daily
http://www.investors.com
Daily; news on the financial markets with an emphasis on
technology.
PC Magazine
http://www.pcmag.com
Bimonthly; covers news in the personal computer industry.
Storage
http://searchstorage.techtarget.com
Storage-specific technical advice for IT professionals,
buyers, and marketers via Storage magazine, websites, and
Storage Decisions conferences and seminars.
MARKET RESEARCH COMPANIES
DellOro Group
http://www.delloro.com
Produces quantitative research related to the networking
and telecommunications equipment market.
Forrester Research Inc.
http://www.forrester.com
Leading market research firm with expertise in technology;
also gives advice about technologys impact on business.
Gartner Inc.
http://www.gartner.com
Provides worldwide market coverage on various sectors of
information technology, including semiconductors, computer
systems and peripherals, communications, document
management, software, and services.
IDC
http://www.idc.com
Leading provider of information technology data, analysis,
and consulting.
ONLINE RESOURCES
CNET News
http://news.cnet.com
Daily news coverage, product reviews, and software
downloads.
Company websites:
Acer Inc.: http://www.acer.com
Apple Inc.: http://www.apple.com
Dell Inc.: http://www.dell.com
Hewlett-Packard Co.: http://www.hp.com
International Business Machines Corp.:
http://www.ibm.com
Lenovo Group Ltd.: http://www.lenovo.com
Oracle Corp.: http://www.oracle.com
Toshiba Corp.: http://www.toshiba.com
EDGAR Database
http://www.sec.gov/edgar/searchedgar/webusers.htm
Site maintained by the Securities and Exchange
Commission that provides access to corporate documents,
such as 10-Ks and 10-Qs.
Network Computing
http://www.networkcomputing.com
Part of UBM TechWeb, a provider of technology media and
business information, this online magazine addresses the
major technological issues IT managers face
GOVERNMENT AGENCIES
Bureau of Economic Analysis
http://www.bea.gov
Agency within the US Department of Commerce; its
mandate is to collect economic data.
US Department of Commerce
http://www.doc.gov
Cabinet-level department responsible for a variety of
government agencies that monitor and regulate US
commerce.

COMPARATIVE COMPANY ANALYSIS
Operating Revenues
Million $ CAGR (%) Index Basis (2003 = 100)
Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS
DDD 3D SYSTEMS CORP DEC 513.4 353.6 A 230.4 A 159.9 A 112.8 A 138.9 110.0 16.7 29.9 45.2 467 321 209 145 103
AAPL [] APPLE INC SEP 170,910.0 A 156,508.0 A 108,249.0 65,225.0 42,905.0 32,479.0 6,207.0 39.3 39.4 9.2 2,754 2,521 1,744 1,051 691
DBD DIEBOLD INC DEC 2,857.5 2,991.7 2,835.8 2,823.8 2,718.3 D 3,170.1 A,C 2,109.7 3.1 (2.1) (4.5) 135 142 134 134 129
EFII ELECTRONICS FOR IMAGING INC DEC 727.7 652.1 591.6 504.0 401.1 560.4 379.6 A 6.7 5.4 11.6 192 172 156 133 106
EMC [] EMC CORP/MA DEC 23,222.0 21,713.9 A 20,007.6 17,015.1 A 14,025.9 A 14,876.2 A 6,236.8 A 14.0 9.3 6.9 372 348 321 273 225
HPQ [] HEWLETT-PACKARD CO OCT 112,298.0 A 120,357.0 127,245.0 126,033.0 114,552.0 118,364.0 A 73,061.0 4.4 (1.0) (6.7) 154 165 174 173 157
IVAC INTEVAC INC DEC 69.6 83.4 83.0 202.5 A 78.0 110.3 36.3 6.7 (8.8) (16.5) 192 230 229 558 215
LXK LEXMARK INTL INC -CL A DEC 3,683.5 3,803.1 4,177.9 4,212.7 3,879.9 4,528.4 4,754.7 (2.5) (4.0) (3.1) 77 80 88 89 82
NCR NCR CORP DEC 6,123.0 A 5,730.0 D 5,443.0 A,C 4,819.0 4,612.0 5,315.0 5,598.0 0.9 2.9 6.9 109 102 97 86 82
NTAP [] NETAPP INC # APR NA 6,332.4 6,233.2 A 5,122.6 3,931.4 3,535.1 1,170.3 A NA NA NA NA 541 533 438 336
QLGC QLOGIC CORP # MAR NA 484.5 558.6 D 597.2 549.1 633.9 523.9 NA NA NA NA 92 107 114 105
SNDK [] SANDISK CORP DEC 6,170.0 5,052.5 5,662.1 4,826.8 3,566.8 3,351.4 1,079.8 19.0 13.0 22.1 571 468 524 447 330
STX [] SEAGATE TECHNOLOGY PLC JUN 14,351.0 14,939.0 A 10,971.0 11,395.0 9,805.0 12,708.0 6,486.0 8.3 2.5 (3.9) 221 230 169 176 151
SMCI SUPER MICRO COMPUTER INC JUN 1,162.6 1,013.9 942.6 721.4 505.6 540.5 NA NA 16.6 14.7 ** ** ** ** NA
WDC [] WESTERN DIGITAL CORP JUN 15,351.0 12,478.0 A 9,526.0 9,850.0 7,453.0 8,074.0 A 2,718.5 18.9 13.7 23.0 565 459 350 362 274
OTHER COMPANIES RELEVANT TO INDUSTRY ANALYSIS
BRCD BROCADE COMMUNICATIONS SYS OCT 2,222.9 2,237.8 2,147.4 2,094.4 1,952.9 A 1,466.9 525.3 A 15.5 8.7 (0.7) 423 426 409 399 372
CSCO [] CISCO SYSTEMS INC JUL 48,607.0 46,061.0 43,218.0 40,040.0 36,117.0 39,540.0 18,878.0 9.9 4.2 5.5 257 244 229 212 191
DELL DELL INC # JAN NA 56,940.0 A 62,071.0 61,494.0 52,902.0 A 61,101.0 41,444.0 C NA NA NA NA 137 150 148 128
ELX EMULEXCORP JUN 478.6 A 501.8 452.5 A 399.1 378.2 488.3 308.2 4.5 (0.4) (4.6) 155 163 147 130 123
FJTSY FUJITSU LTD -ADR # MAR NA 46,534.9 54,211.6 A 54,717.3 50,101.9 A 47,332.1 44,970.6 NA NA NA NA 103 121 122 111
IBM [] INTL BUSINESS MACHINES CORP DEC 99,751.0 A 104,507.0 A 106,916.0 A 99,871.0 A 95,758.0 A 103,630.0 A 89,131.0 A 1.1 (0.8) (4.6) 112 117 120 112 107
ORCL [] ORACLE CORP # MAY NA 37,180.0 A 37,121.0 35,622.0 A 26,820.0 A 23,252.0 10,156.0 NA NA NA NA 366 366 351 264
TOSYY TOSHIBA CORP -ADR # MAR NA 61,600.3 A 74,023.3 A 77,314.0 D 68,619.3 67,903.2 D 52,636.8 NA NA NA NA 117 141 147 130
VMW VMWARE INC -CL A DEC 5,207.0 4,605.0 A 3,767.1 2,857.3 2,023.9 1,881.0 NA NA 22.6 13.1 ** ** ** ** NA
Note: Data as originally reported. CAGR-Compound annual growth rate. S&P 1500 index group. []Company included in the S&P 500. Company included in the S&P MidCap 400. Company included in the S&P SmallCap 600. #Of the following calendar year.
**Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change.
D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

Net Income
Million $ CAGR (%) Index Basis (2003 = 100)
Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009
DDD 3D SYSTEMS CORP DEC 44.1 38.9 35.4 19.6 1.1 (6.2) (19.0) NM NM 13.3 NM NM NM NM NM
AAPL [] APPLE INC SEP 37,037.0 41,733.0 25,922.0 14,013.0 8,235.0 4,834.0 68.0 NM 50.3 (11.3) NM NM NM NM NM
DBD DIEBOLD INC DEC (181.6) 81.6 144.3 (20.5) 73.1 101.5 174.8 NM NM NM (104) 47 83 (12) 42
EFII ELECTRONICS FOR IMAGING INC DEC 109.1 83.3 27.5 7.5 (2.2) (113.4) 26.5 15.2 NM 31.0 412 314 104 28 (8)
EMC [] EMC CORP/MA DEC 2,889.0 2,732.6 2,461.3 1,900.0 1,088.1 1,345.6 496.1 19.3 16.5 5.7 582 551 496 383 219
HPQ [] HEWLETT-PACKARD CO OCT 5,113.0 (12,650.0) 7,074.0 8,761.0 7,660.0 8,329.0 2,539.0 7.3 (9.3) NM 201 (498) 279 345 302
IVAC INTEVAC INC DEC (15.7) (55.3) (22.0) 28.0 (10.1) (15.3) (12.3) NM NM NM NM NM NM NM NM
LXK LEXMARK INTL INC -CL A DEC 261.8 106.3 320.9 340.0 145.9 240.2 439.2 (5.0) 1.7 146.3 60 24 73 77 33
NCR NCR CORP DEC 452.0 140.0 50.0 111.0 (33.0) 231.0 58.0 22.8 14.4 222.9 779 241 86 191 (57)
NTAP [] NETAPP INC # APR NA 505.3 605.4 673.1 400.4 86.5 152.1 NA NA NA ** 332 398 443 263
QLGC QLOGIC CORP # MAR NA 73.6 119.4 139.1 54.9 108.8 133.7 NA NA NA ** 55 89 104 41
SNDK [] SANDISK CORP DEC 1,042.7 417.4 987.0 1,300.1 415.3 (2,056.8) 168.9 20.0 NM 149.8 617 247 585 770 246
STX [] SEAGATE TECHNOLOGY PLC JUN 1,838.0 2,862.0 511.0 1,609.0 (3,086.0) 1,262.0 641.0 11.1 7.8 (35.8) 287 446 80 251 (481)
SMCI SUPER MICRO COMPUTER INC JUN 21.3 29.9 40.2 26.9 16.1 25.4 NA NA (3.5) (28.7) ** ** ** ** NA
WDC [] WESTERN DIGITAL CORP JUN 980.0 1,612.0 726.0 1,382.0 470.0 867.0 180.8 18.4 2.5 (39.2) 542 892 402 764 260
BRCD BROCADE COMMUNICATIONS SYS OCT 208.6 195.2 50.6 118.9 (76.6) 167.1 (136.2) NM 4.5 6.9 NM NM NM NM NM
CSCO [] CISCO SYSTEMS INC JUL 9,990.0 8,041.0 6,490.0 7,767.0 6,134.0 8,052.0 3,578.0 10.8 4.4 24.2 279 225 181 217 171
DELL DELL INC # JAN NA 2,372.0 3,492.0 2,635.0 1,433.0 2,478.0 2,645.0 NA NA NA ** 90 132 100 54
ELX EMULEXCORP JUN (5.2) (11.1) (83.6) 23.6 7.5 (7.1) 65.7 NM NM NM (8) (17) (127) 36 11
FJTSY FUJITSU LTD -ADR # MAR NA (774.4) 518.2 665.7 996.6 (1,133.5) 468.9 NA NA NA ** (165) 111 142 213
IBM [] INTL BUSINESS MACHINES CORP DEC 16,483.0 16,604.0 15,855.0 14,833.0 13,425.0 12,334.0 7,613.0 8.0 6.0 (0.7) 217 218 208 195 176
ORCL [] ORACLE CORP # MAY NA 10,925.0 9,981.0 8,547.0 6,135.0 5,593.0 2,681.0 NA NA NA ** 407 372 319 229
TOSYY TOSHIBA CORP -ADR # MAR NA 823.4 910.1 1,764.5 (206.2) (3,365.1) 271.9 NA NA NA ** 303 335 649 (76)
VMW VMWARE INC -CL A DEC 1,014.0 745.7 723.9 357.4 197.1 290.1 NA NA 28.4 36.0 ** ** ** ** NA
Note: Data as originally reported. CAGR-Compound annual growth rate. S&P 1500 index group. []Company included in the S&P 500. Company included in the S&P MidCap 400. Company included in the S&P SmallCap 600.
#Of the following calendar year. **Not calculated; data for base year or end year not available.

Return on Revenues (%) Return on Assets (%) Return on Equity (%)
Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009
DDD 3D SYSTEMS CORP DEC 8.6 11.0 15.4 12.2 0.9 5.0 6.8 10.5 10.9 0.7 6.2 10.6 18.3 16.5 1.0
AAPL [] APPLE INC SEP 21.7 26.7 23.9 21.5 19.2 19.3 28.5 27.1 22.8 18.9 30.6 42.8 41.7 35.3 31.3
DBD DIEBOLD INC DEC NM 2.7 5.1 NM 2.7 NM 3.2 5.7 NM 2.9 NM 10.0 16.1 NM 7.3
EFII ELECTRONICS FOR IMAGING INC DEC 15.0 12.8 4.6 1.5 NM 10.4 9.2 3.8 1.1 NM 15.4 13.7 4.9 1.4 NM
EMC [] EMC CORP/MA DEC 12.4 12.6 12.3 11.2 7.8 6.9 7.6 7.6 6.6 4.3 12.9 13.2 13.5 11.5 7.6
HPQ [] HEWLETT-PACKARD CO OCT 4.6 NM 5.6 7.0 6.7 4.8 NM 5.6 7.3 6.7 20.6 NM 17.9 21.6 19.3
IVAC INTEVAC INC DEC NM NM NM 13.8 NM NM NM NM 12.3 NM NM NM NM 14.8 NM
LXK LEXMARK INTL INC -CL A DEC 7.1 2.8 7.7 8.1 3.8 7.3 3.0 8.7 9.6 4.4 19.8 8.0 23.0 28.2 16.0
NCR NCR CORP DEC 7.4 2.4 0.9 2.3 NM 6.2 2.3 1.0 2.6 NM 30.0 13.7 5.9 15.3 NM
NTAP [] NETAPP INC # APR NA 8.0 9.7 13.1 10.2 NA 4.9 6.7 9.0 6.7 NA 11.2 15.1 21.5 19.1
QLGC QLOGIC CORP # MAR NA 15.2 21.4 23.3 10.0 NA 8.5 14.3 18.4 7.2 NA 9.8 17.6 23.5 9.1
SNDK [] SANDISK CORP DEC 16.9 8.3 17.4 26.9 11.6 10.0 4.1 10.4 17.6 7.0 14.7 5.8 15.4 26.8 11.7
STX [] SEAGATE TECHNOLOGY PLC JUN 12.8 19.2 4.7 14.1 NM 19.0 29.6 5.8 21.0 NM 52.6 96.0 19.7 75.8 NM
SMCI SUPER MICRO COMPUTER INC JUN 1.8 2.9 4.3 3.7 3.2 3.5 5.7 9.6 8.2 5.9 6.0 9.5 15.7 13.3 9.7
WDC [] WESTERN DIGITAL CORP JUN 6.4 12.9 7.6 14.0 6.3 6.9 14.4 9.4 21.9 9.2 12.6 24.5 14.2 35.0 16.0
BRCD BROCADE COMMUNICATIONS SYS OCT 9.4 8.7 2.4 5.7 NM 5.8 5.5 1.4 3.2 NM 9.1 9.2 2.5 6.2 NM
CSCO [] CISCO SYSTEMS INC JUL 20.6 17.5 15.0 19.4 17.0 10.4 9.0 7.7 10.4 9.7 18.1 16.3 14.2 18.7 16.8
DELL DELL INC # JAN NA 4.2 5.6 4.3 2.7 NA 5.2 8.4 7.3 4.8 NA 24.2 41.9 39.3 28.9
ELX EMULEXCORP JUN NM NM NM 5.9 2.0 NM NM NM 3.5 1.1 NM NM NM 4.1 1.3
FJTSY FUJITSU LTD -ADR # MAR NA NM 1.0 1.2 2.0 NA NM 1.4 1.9 3.0 NA NM 5.1 7.2 12.4
IBM [] INTL BUSINESS MACHINES CORP DEC 16.5 15.9 14.8 14.9 14.0 13.4 14.1 13.8 13.3 12.3 79.1 85.2 73.4 64.9 74.4
ORCL [] ORACLE CORP # MAY NA 29.4 26.9 24.0 22.9 NA 13.6 13.1 12.7 11.3 NA 24.7 23.9 24.2 22.0
TOSYY TOSHIBA CORP -ADR # MAR NA 1.3 1.2 2.3 NM NA 1.2 1.4 2.9 NM NA 7.7 8.7 18.5 NM
VMW VMWARE INC -CL A DEC 19.5 16.2 19.2 12.5 9.7 8.8 7.7 9.4 6.0 4.4 16.2 14.2 16.9 10.9 8.2
Note: Data as originally reported. S&P 1500 index group. []Company included in the S&P 500. Company included in the S&P MidCap 400. Company included in the S&P SmallCap 600. #Of the following calendar year.

Debt as a % of
Current Ratio Debt / Capital Ratio (%) Net Working Capital
DDD 3D SYSTEMS CORP DEC 4.8 3.8 4.4 1.7 2.1 1.9 14.9 35.3 5.7 7.3 4.5 41.4 68.6 19.0 22.5
AAPL [] APPLE INC SEP 1.7 1.5 1.6 2.0 2.7 10.8 0.0 0.0 0.0 0.0 57.2 0.0 0.0 0.0 0.0
DBD DIEBOLD INC DEC 1.7 2.2 2.1 2.1 2.1 44.2 42.2 41.4 35.7 33.6 72.6 63.3 66.7 60.9 65.3
EFII ELECTRONICS FOR IMAGING INC DEC 3.0 1.7 2.9 3.2 3.4 1.5 0.0 0.0 0.0 0.0 2.9 0.0 0.0 0.0 0.0
EMC [] EMC CORP/MA DEC 1.5 1.2 1.1 1.0 2.0 19.5 0.0 0.0 0.0 16.0 100.3 0.0 0.0 0.0 57.5
HPQ [] HEWLETT-PACKARD CO OCT 1.1 1.1 1.0 1.1 1.2 35.7 46.2 34.0 25.0 23.8 342.9 548.7 NM 319.1 146.6
IVAC INTEVAC INC DEC 6.4 5.5 5.3 5.2 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
LXK LEXMARK INTL INC -CL A DEC 1.7 1.3 2.0 1.8 1.8 33.0 18.6 31.5 31.6 38.1 84.8 62.6 59.8 63.4 68.4
NCR NCR CORP DEC 2.3 2.0 1.6 1.8 1.7 65.1 60.0 51.6 1.1 1.9 135.1 113.6 89.7 0.9 1.2
NTAP [] NETAPP INC # APR NA 2.2 1.9 1.9 2.4 NA 17.4 0.0 0.0 30.3 NA 21.7 0.0 0.0 41.9
QLGC QLOGIC CORP # MAR NA 7.8 8.5 6.3 5.9 NA 0.0 0.0 0.0 0.0 NA 0.0 0.0 0.0 0.0
SNDK [] SANDISK CORP DEC 3.8 2.4 4.0 4.2 3.3 22.2 9.8 18.4 22.7 19.2 58.0 29.0 49.2 55.7 45.7
STX [] SEAGATE TECHNOLOGY PLC JUN 2.1 1.9 1.9 1.8 1.3 44.1 45.0 54.5 44.4 56.2 99.0 98.2 99.7 89.8 178.3
SMCI SUPER MICRO COMPUTER INC JUN 2.2 2.2 2.6 2.2 2.5 1.7 5.4 8.8 0.0 5.2 2.3 7.4 12.1 0.0 7.4
WDC [] WESTERN DIGITAL CORP JUN 1.9 1.8 2.5 2.3 2.1 17.9 20.3 2.7 5.9 11.1 47.6 62.9 4.5 10.9 23.5
BRCD BROCADE COMMUNICATIONS SYS OCT 2.5 1.9 1.5 1.5 1.0 20.3 21.1 27.1 30.5 32.8 69.2 109.9 269.2 294.7 NM
CSCO [] CISCO SYSTEMS INC JUL 3.0 3.5 3.3 2.7 3.2 17.8 24.1 25.5 21.5 21.0 29.8 36.9 40.9 37.9 33.7
DELL DELL INC # JAN NA 1.2 1.3 1.5 1.3 NA 31.8 41.1 39.9 37.7 NA 115.7 85.8 54.0 64.7
ELX EMULEXCORP JUN 3.3 3.5 4.2 6.9 7.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
FJTSY FUJITSU LTD -ADR # MAR NA 1.1 1.2 1.2 1.2 NA 25.0 24.4 24.1 32.3 NA 176.9 98.5 107.6 127.1
IBM [] INTL BUSINESS MACHINES CORP DEC 1.3 1.1 1.2 1.2 1.4 57.3 55.5 52.5 48.3 48.7 293.5 414.7 259.6 289.2 169.6
ORCL [] ORACLE CORP # MAY NA 3.2 2.6 2.8 1.8 NA 29.2 23.6 27.1 26.9 NA 64.2 54.9 59.1 93.5
TOSYY TOSHIBA CORP -ADR # MAR NA 1.2 1.1 1.1 1.1 NA 50.1 51.2 47.0 54.6 NA 247.3 265.8 255.4 351.8
VMW VMWARE INC -CL A DEC 2.3 2.1 2.4 2.4 2.5 6.2 7.3 8.6 10.5 13.8 10.3 14.2 13.7 17.9 23.8

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)
Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009
DDD 3D SYSTEMS CORP DEC NM - 62 74 - 20 41 - 18 40 - 12 NM - 75 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
AAPL [] APPLE INC SEP 14 - 10 16 - 9 15 - 11 21 - 12 23 - 8 28 6 0 0 0 3.0 - 2.0 0.6 - 0.4 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
DBD DIEBOLD INC DEC NM - NM 33 - 21 17 - 11 NM - NM 30 - 17 NM 88 50 NM 95 4.2 - 3.2 4.1 - 2.7 4.5 - 3.0 5.9 - 3.1 5.5 - 3.1
EFII ELECTRONICS FOR IMAGING INC DEC 17 - 8 11 - 7 32 - 22 93 - 57 NM - NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
EMC [] EMC CORP/MA DEC 20 - 15 23 - 16 24 - 17 25 - 18 34 - 18 14 0 0 0 0 0.9 - 0.7 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
HPQ [] HEWLETT-PACKARD CO OCT 11 - 6 NM - NM 15 - 6 14 - 10 16 - 8 21 NM 12 8 10 3.8 - 1.9 4.4 - 1.7 1.9 - 0.8 0.9 - 0.6 1.3 - 0.6
IVAC INTEVAC INC DEC NM - NM NM - NM NM - NM 13 - 7 NM - NM NM NM NM 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
LXK LEXMARK INTL INC -CL A DEC 10 - 5 25 - 10 10 - 6 11 - 6 16 - 8 29 74 6 0 0 5.5 - 2.9 7.1 - 3.0 1.0 - 0.6 0.0 - 0.0 0.0 - 0.0
NCR NCR CORP DEC 15 - 9 30 - 19 66 - 48 23 - 16 NM - NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
NTAP [] NETAPP INC # APR NA - NA 33 - 19 37 - 20 31 - 15 30 - 11 NA 0 0 0 0 NA - NA 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
QLGC QLOGIC CORP # MAR NA - NA 24 - 11 16 - 10 17 - 11 42 - 19 NA 0 0 0 0 NA - NA 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
SNDK [] SANDISK CORP DEC 16 - 10 31 - 18 13 - 8 9 - 4 17 - 4 10 0 0 0 0 1.0 - 0.6 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
STX [] SEAGATE TECHNOLOGY PLC JUN 11 - 6 5 - 2 16 - 8 7 - 3 NM - NM 28 13 16 0 NM 4.6 - 2.5 5.3 - 2.4 2.0 - 1.0 0.0 - 0.0 9.1 - 1.5
SMCI SUPER MICRO COMPUTER INC JUN 34 - 18 26 - 11 19 - 11 27 - 12 24 - 9 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
WDC [] WESTERN DIGITAL CORP JUN 21 - 10 7 - 4 13 - 7 8 - 4 21 - 5 25 0 0 0 0 2.4 - 1.2 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
BRCD BROCADE COMMUNICATIONS SYS OCT 20 - 11 15 - 10 66 - 29 30 - 17 NM - NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
CSCO [] CISCO SYSTEMS INC JUL 14 - 11 14 - 10 19 - 11 20 - 14 24 - 13 33 19 10 0 0 3.1 - 2.3 1.9 - 1.3 0.9 - 0.5 0.0 - 0.0 0.0 - 0.0
DELL DELL INC # JAN NA - NA 14 - 6 9 - 7 13 - 8 24 - 11 NA 12 0 0 0 NA - NA 1.8 - 0.9 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
ELX EMULEXCORP JUN NM - NM NM - NM NM - NM 49 - 29 NM - 50 NM NM NM 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
FJTSY FUJITSU LTD -ADR # MAR NA - NA NM - NM 28 - 18 23 - 19 15 - 6 NA NM 51 38 18 NA - NA 1.8 - 1.1 2.9 - 1.8 2.0 - 1.6 2.9 - 1.3
IBM [] INTL BUSINESS MACHINES CORP DEC 14 - 11 15 - 12 15 - 11 13 - 10 13 - 8 25 23 22 21 21 2.1 - 1.7 1.9 - 1.6 2.0 - 1.5 2.2 - 1.7 2.6 - 1.6
ORCL [] ORACLE CORP # MAY NA - NA 15 - 11 18 - 12 19 - 13 21 - 11 NA 13 12 12 16 NA - NA 1.2 - 0.9 1.0 - 0.7 1.0 - 0.7 1.4 - 0.8
TOSYY TOSHIBA CORP -ADR # MAR NA - NA 23 - 15 30 - 18 14 - 11 NM - NM NA 45 48 15 NM NA - NA 3.0 - 1.9 2.7 - 1.6 1.3 - 1.0 0.0 - 0.0
VMW VMWARE INC -CL A DEC 42 - 27 68 - 45 65 - 43 NM - 47 91 - 38 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0
2009 2013 2012 2011 2010

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)
DDD 3D SYSTEMS CORP DEC 0.45 0.48 0.47 0.28 0.02 4.08 1.47 1.23 0.80 0.77 95.40 - 27.88 35.65 - 9.82 19.56 - 8.52 11.43 - 3.50 3.97 - 1.25
AAPL [] APPLE INC SEP 40.03 44.64 28.05 15.41 9.22 131.00 120.16 77.68 50.99 34.54 575.14 - 385.10 705.07 - 409.00 426.70 - 310.50 326.66 - 190.25 213.95 - 78.20
DBD DIEBOLD INC DEC (2.85) 1.29 2.24 (0.31) 1.10 6.51 8.49 8.36 9.68 8.98 35.40 - 27.59 42.93 - 27.66 37.12 - 24.70 35.20 - 18.26 33.18 - 18.80
EFII ELECTRONICS FOR IMAGING INC DEC 2.34 1.79 0.59 0.16 (0.04) 9.91 7.63 7.55 7.82 7.76 39.87 - 18.97 19.10 - 12.89 19.17 - 12.71 14.87 - 9.18 13.15 - 7.75
EMC [] EMC CORP/MA DEC 1.39 1.31 1.20 0.92 0.54 2.64 2.74 2.13 1.66 2.28 27.34 - 21.45 30.00 - 21.59 28.73 - 19.84 23.20 - 16.45 18.44 - 9.61
HPQ [] HEWLETT-PACKARD CO OCT 2.64 (6.41) 3.38 3.78 3.21 (3.68) (6.70) (8.45) (2.67) 0.34 28.70 - 14.74 30.00 - 11.35 49.39 - 21.50 54.75 - 37.32 52.95 - 25.39
IVAC INTEVAC INC DEC (0.66) (2.37) (0.96) 1.26 (0.46) 5.25 5.83 7.23 8.06 7.24 8.10 - 4.06 9.36 - 4.31 15.30 - 6.11 16.85 - 8.97 13.62 - 3.35
LXK LEXMARK INTL INC -CL A DEC 4.16 1.55 4.16 4.33 1.87 10.55 10.53 14.34 13.41 12.42 41.45 - 21.65 38.34 - 16.10 40.54 - 25.87 48.07 - 25.10 29.16 - 14.23
NCR NCR CORP DEC 2.73 0.88 0.32 0.69 (0.21) (2.71) (1.24) (3.45) 4.72 2.77 41.63 - 25.64 25.99 - 16.39 20.97 - 15.28 16.00 - 11.11 15.23 - 6.62
NTAP [] NETAPP INC # APR NA 1.40 1.66 1.87 1.18 NA 9.95 8.65 7.90 5.25 44.65 - 31.74 46.80 - 26.26 61.02 - 33.00 57.96 - 28.92 34.99 - 12.39
QLGC QLOGIC CORP # MAR NA 0.79 1.17 1.29 0.47 NA 6.88 6.52 4.48 3.97 12.90 - 9.29 19.00 - 8.63 18.83 - 11.95 22.40 - 14.30 19.62 - 8.82
SNDK [] SANDISK CORP DEC 4.44 1.72 4.12 5.59 1.83 28.42 28.23 27.30 24.29 16.85 70.93 - 44.30 53.08 - 30.99 53.60 - 32.24 52.31 - 24.90 31.18 - 7.53
STX [] SEAGATE TECHNOLOGY PLC JUN 4.97 6.72 1.13 3.28 (6.32) 7.27 6.38 5.73 5.71 2.94 57.07 - 30.26 35.71 - 16.21 18.60 - 9.05 21.58 - 9.84 18.59 - 2.98
SMCI SUPER MICRO COMPUTER INC JUN 0.50 0.72 1.04 0.73 0.47 8.83 8.14 7.13 6.06 5.14 17.23 - 9.20 18.87 - 7.85 19.30 - 11.40 19.55 - 8.52 11.50 - 4.30
WDC [] WESTERN DIGITAL CORP JUN 4.07 6.69 3.14 6.06 2.12 22.51 19.90 22.60 19.37 13.17 84.70 - 41.62 45.94 - 28.31 41.87 - 22.64 47.44 - 23.06 44.96 - 11.49
BRCD BROCADE COMMUNICATIONS SYS OCT 0.46 0.43 0.11 0.27 (0.19) 1.48 1.10 0.38 0.12 (0.82) 9.03 - 5.14 6.44 - 4.18 7.30 - 3.18 8.05 - 4.64 9.84 - 2.05
CSCO [] CISCO SYSTEMS INC JUL 1.87 1.50 1.17 1.36 1.05 6.27 6.10 5.13 4.30 4.15 26.49 - 19.98 21.30 - 14.96 22.34 - 13.30 27.74 - 19.00 24.83 - 13.61
DELL DELL INC # JAN NA 1.36 1.90 1.36 0.73 NA (1.15) 0.69 0.99 (0.06) NA - NA 18.36 - 8.69 17.60 - 12.99 17.52 - 11.34 17.26 - 7.84
ELX EMULEXCORP JUN (0.06) (0.13) (0.97) 0.29 0.09 2.19 3.28 3.13 5.61 5.41 8.99 - 5.72 11.19 - 5.85 12.97 - 5.86 14.34 - 8.27 12.33 - 4.53
FJTSY FUJITSU LTD -ADR # MAR NA (1.87) 1.25 1.61 2.42 NA 15.25 17.91 16.62 13.47 26.01 - 18.04 28.00 - 17.02 34.87 - 22.00 37.00 - 30.01 35.27 - 15.64
IBM [] INTL BUSINESS MACHINES CORP DEC 15.06 14.53 13.25 11.69 10.12 (11.63) (12.68) (8.14) (4.54) (0.05) 215.90 - 172.57 211.79 - 177.35 194.90 - 146.64 147.53 - 116.00 132.85 - 81.76
ORCL [] ORACLE CORP # MAY NA 2.29 1.99 1.69 1.22 NA 2.30 2.18 2.04 0.21 38.34 - 29.86 34.35 - 25.33 36.50 - 24.72 32.27 - 21.24 25.11 - 13.80
TOSYY TOSHIBA CORP -ADR # MAR NA 1.17 1.29 2.50 (0.30) NA 1.73 2.68 5.29 2.72 34.49 - 23.00 27.49 - 17.78 39.28 - 22.83 35.99 - 27.33 36.97 - 2.15
VMW VMWARE INC -CL A DEC 2.36 1.75 1.72 0.87 0.50 7.39 4.96 5.90 4.62 3.48 99.10 - 64.86 118.79 - 79.46 111.43 - 74.04 91.95 - 41.09 45.57 - 19.15
J-This amount includes intangibles that cannot be identified.
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