The winner in the Blu-ray and HD DVD war is the hard drive, according to Bill Watkins, CEO of Seagate Technology.
"People are saying Blu-ray won the war but who cares? The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that," he said during a breakfast meeting at the Consumer Electronics Show here this week. "In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost."
Watkins, naturally, speaks from personal interest, but he has got a point. (A former Army grunt and a decades-long Deadhead, Watkins is also one of the more entertaining CEOs in the technology industry to interview.) Consumers have not been buying Blu-ray or HD DVD players and by the time they do, technology companies will likely be hawking sophisticated on-demand services and Internet Protocol TV.
IPTV, in fact, is the dominant theme of the show. Sharp, Samsung, and Panasonic all unfurled content alliances that will let consumers look at headlines or videos from the Net on their TVs.
That is good news for Seagate, because electronic distribution means more hard drive sales. "If (data) is in the cloud I get more storage sales because you have to back up everything," he said.
"Surveillance is a big deal," he added. "You're being filmed right now (we were in a casino) and they've got to store it somewhere."
Hard drive makers are right now living through good times. In the 1990s, excess manufacturing capacity and price cuts led to stagnant revenues and losses for many companies. Since then, many players have dropped out.
New markets such as digital video recorders opened up for drive makers. As a result, both Seagate and Rival Western Digital are seeing double-digit growth. Seagate has already upped its revenue guidance twice for the quarter that just ended.
And the future continues to look good. Hollywood, Watkins said, will have no choice but to get into home delivery of content in a big way. People are leaving home less and less. And if the movie studios don't deliver their content to their home, people will watch whatever they can find on the Internet.
At CES, XStreamHD is showing off a box that gets on-demand movies from a satellite. Actor Michael Douglas is an investor.
"They will watch lousy content if it is easy to do," he said.
Other notes from Watkins:
- Seagate does not have its solid state drive out yet, but it's coming. Flash memory, he added, will never completely take over the hard drive market. The demand for storage is too big. If a flash maker wanted to provide just 15 percent of the world's market for storage in 2012, it would have to invest $50 billion this year alone. "And right now, no one has made that investment," he said. He further argued that flash memory gets too much attention from Wall Street. "I'm making 75 cents a quarter, and I get half the valuation of SanDisk or Micron," he added.
- Consumers still seem buoyant in Europe and Asia, so a lengthy, full-blown global recession may not occur. Admittedly, he adds, that's his own spin.
- America has got to reform its immigration laws by letting in more immigrants. Nearly 60 percent of the companies in Silicon Valley were founded by people born outside the U.S. Last year, close to 70 percent of the students getting Ph.D.s in engineering were from other countries. "And none of them got a green card," he said. "Because of this, U.S. companies will have to put R&D overseas."
- Speaking of foreign lands, the government-to-university-to-private sector triumvirate (the government provides grants, universities invent stuff, and the private sector sells it) that helped build the tech industry in the United States no longer works as well as it once did. However, they have copied it pretty well overseas. "They are following what made us successful and here it's broken," he said. "We used to say that what is good for GM is good for America. Now, what is good for the stockholders is not necessarily good for America. That drives me crazy."
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