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Seagate has come a long way in the data storage business, from its 5MB ST506 hard drive in 1979 to its latest 1TB Barracuda introduced last year. And today the company announced that it is the first manufacturer to ship 1 billion hard drives.

If you can't visualize that many storage devices, picture this: You can circle the globe 13.7 times with the 1 billion hard drives placed end-to-end, according to Seagate.

(Credit: Seagate)

Not all of them bear the Seagate brand. The number also includes the ones manufactured by Conner, which merged with Seagate in 1996, as well as those from Maxtor, which was acquired in December 2005.

More noteworthy, however, are some of the other statistics behind the accomplishment. For example, the first 5MB drive--the Seagate ST506--weighs a hefty 5 pounds and cost $1,500 when it debuted in 1980. A 3.5-inch 1TB drive today, which has 200,000 times more capacity, retails at only a fraction of that cost.

Another interesting fact: It took Seagate 17 years to ship the first 100 million drives, but only 12 years to make the next 900 million.

What's scary is that Seagate expects to hit the 2 billion milestone within the next 5 years, based on current increases in production capacity and demand. That looks like a very possible scenario, considering the amount of data we guzzle daily with no signs of slowing down.

At its press event, Seagate also did a little crystal-ball gazing, predicting that higher broadband penetration and rapid growth in digital content will increase market demand for hard drive storage by almost 80 percent by 2012. But the company has played down the impact of solid state drives (SSDs) on traditional disk-based devices, believing instead that hybrid drives will be more affordable for most consumers. The company will still be involved in the SSD business though, with its first product expected later this year.

(Source: Crave Asia)

Seagate Technology just might have a few patents that make the rest of the storage industry squirm.

Earlier this week, Seagate, the world's largest hard-drive maker, announced that it was suing STEC, alleging that the company violated four of its patents and other intellectual property.

The patents largely revolve around how a manufacturer would take flash memory and make it into a functioning hard drive. Seagate's hard drives store data on magnetic platters. There is more to the drive than the platters, however. Getting the data off of the platters and into a processor requires interfaces, controllers, and other hardware. Seagate's suit essentially states that although STEC might be using flash memory in its drives, the overall construction of its drives infringes on Seagate's patents.

Video: Seagate CEO Bill Watkins looks ahead.
Click the image above to watch.

And this one seems to be the big patent in the bunch: U.S. Patent No. 6,404,647 for a solid-state mass memory storage device. It was filed by Hewlett-Packard in 2000, and the U.S. Patent Office issued it in 2002. Seagate acquired it from HP some years back.

"The present disclosure relates to a solid-state mass memory storage device. More particularly, the disclosure relates to a semiconductor mass memory storage device suitable for disk drive replacement," the patent states.

The full patent is far longer, but that's the gist of it. It appears to describe a solid-state drive that could replace a standard hard drive. Seagate isn't talking a lot about the details of the suit, but CEO Bill Watkins said, "STEC is not the only company we are looking at."

Can a company really patent the concept of a solid-state drive? Determining the scope of patents like this could take years, said Jim Porter, an analyst at Disk/Trends. (We've also only examined it for a while but will do more research and talk to experts. The other patents are Nos. 6,849,480; 6,336,174; and 7,042,664.) Rodine sued a raft of hard-drive makers in the 1990s over its patents for a design for a 3.5-inch drive. The industry eventually went toward 3.25-inch form factors. But the suits were filed, and for a while they sent shivers down the spine of some executives.

Seagate's Bill Watkins says, "Sit down. Have something to eat..."

(Credit: Michael Kanellos/CNET News.com )

If Seagate decides to broadly press its claims and prevails, the patents collectively could be worth millions. They could entitle Seagate to get a few dollars for every solid-state hard drive shipping out the door from manufacturers worldwide. DVD manufacturers pay around $15 to three sets of patent holders for every DVD player they ship. Philips and Sony reaped millions in royalties for inventing the CD. The Blu-ray Disc/HD DVD war centered on royalties. It's a good business too--you basically wait for the check, once you wade through expensive and hard-fought litigation.

So if the patent is so good why would Seagate go after STEC? To set an example. In the tech world, companies typically don't like to sign license and royalty agreements. Potential licensees often make the patent holder sue one or more companies first. If the potential licensees prevail, the conflict can fade away.

If the patent holder prevails in court, other potential defendants line up to sign deals.

STEC is a small player. If it wins, other industry players will applaud its pluck. If it loses, other manufacturers of flash drives like Intel, Toshiba, and SanDisk might decide to line up dutifully to pay Seagate royalties. And since there may not be a pre-existing lawsuit, there won't be as much bad blood.

"They (Seagate) have always been willing to license," Porter said.

Business is slowing a bit in the drive industry.

The Scotts Valley, Calif.-based company said it pulled in $3.1 billion in revenue for its third fiscal quarter, which ran from January through March, and $344 million in net income. Net income per share came to 65 cents.

While the figures for the January-March represents an increase in revenue and net income over last year, retail sales of drives and sales into the notebook market in the past three months came in at less than expected, said CEO Bill Watkins in a prepared statement.

The company, however, also lowered forecasts for the current quarter. Seagate says revenue will come to $2.85 to $3.0 billion while net income will come to 41 to 45 cents per share, excluding certain charges. Analysts have expected $3.1 billion and 57 cents a share excluding charges. It is unclear what might be causing the more drastic drop off in net income, but it could be price declines, a never-ending fact of life for hard drive makers.

(Last year at this time, Seagate reported revenue of $2.8 billion and net income of $212 million, but there were non-recurring charges in both quarters and last year's quarter was a disappointment.)

In all, Seagate shipped 43 million units during the quarter. In the previous quarter, the end of 2007, the company shipped 50 million units. Business usually drops off from the last quarter of a year to the first quarter by around 6 to 12 percent. Thus, the decline in shipments is a little steeper than the norm.

Update: Matt Bryson of Avian Securities concurred, stating that shipments were about three million light in the quarter. The extra inventory will cause earnings to sag a bit, but the second half will be stronger.

STEC issued a formal response Tuesday to a patent infringement lawsuit filed by rival storage maker Seagate Technology and its subsidiaries.

STEC, which responded to the lawsuit Seagate filed Monday in the U.S. District Court for the Northern District of California, says it will "aggressively" defend itself against Seagate's four patent infringement claims and contends it was one of the first companies to develop, manufacture, and ship high-performance solid-state drives (SSDs), predating the patents cited in Seagate's complaint.

Seagate is alleging STEC violated four of its patents relating to its SSDs, memory-backup systems, and self-testing systems for devices, according to a report in MarketWatch.com.

STEC, which said it has been shipping SSDs as early as 1994, said it plans to review the patents cited in Seagate's claims to determine whether any of its patents had been violated.

"STEC believes it held such technology including prior patents, dating more than a decade prior to any of Seagate's patents," STEC said in its response.

STEC alleges the Seagate lawsuits take aim at its Zeus-IOPS technology, a new line of SSDs targeted toward the enterprise storage market. SSDs competes against hard disk drive technology. Some storage makers like Samsung are looking to straddle both worlds. Samsung has said it has no plans to pit mechanical hard drives against solid-state flash drives.

Do you want to know the best thing about a notebook with a flash memory drive, rather than a conventional hard drive?

It's the silence.

The notebook I'm testing--a Dell Latitude D830 with a 64GB flash hard drive from Samsung--hasn't emitted a sound in three days. Flash drives, which store data in NAND flash memory, don't require motors or spinning platters. Thus, there are no whirring mechanical noises.

A Dell Latitude with a flash drive. You can definitely tell a difference in performance, but is it worth the $900 premium?

(Credit: Michael Kanellos/CNET News.com)

Compare that with my T42 ThinkPad. It sounds like a guinea pig got trapped inside, particularly during the start-up phase. Vzoooot. Cronk, cronk, cronk. Zip, zip. (Pause.) Gurlagurlagurla...zweeee.

The lack of a mechanical hard drive also means lower power consumption and less heat. In turn that means the fan rarely, if ever, needs to kick into action. As I type, for instance, the notebook is running eight video streams-- two from CNN, two from CNET, two from MSN, a video on new bands on Crackle, and a pirated Led Zeppelin video on YouTube--and the fan won't trip over. The computer is running on battery power and the videos, with a few minor gulps, are all running smoothly.

If it did have a conventional hard drive, the fan would have flipped on, sapping battery power, and cranking out some white noise. I know that because I got the fans on my ThinkPad (as well as home notebook from Hewlett-Packard) to start in similar circumstances.

Is the quiet and extra battery life worth nearly a $900 premium? In a word, no, but you've got to look at the future. Although in the price stratosphere now, flash drives will start to compete more directly with drives over the next four years. Flash memory density continues to increase at a rapid pace, doubling almost every year, and large manufacturers like Samsung, Toshiba, SanDisk and Intel have or are opening factories geared at churning out flash. Taken together, this will lead to an easy availability of chips, better capabilities, and recurring price wars.

Flash prices dropped 50 percent in 2006. Prices rose a bit in 2007, but then dropped 50 percent from the fourth quarter of 2007 to the first quarter of 2008, says Jim Handy of Objective Analysis. Hardware manufacturers can now buy 1GB of flash for $3, he added.

When the premium becomes more acceptable, say $100, the category could take off. The lack of noise isn't one of the benefits I expected, but it was tangible. Listening to the drive on my IBM always prompts two thoughts. One, turning on a PC takes more time than it should and, two, this thing could collapse at any moment. To be honest, the ThinkPad has never imploded because of a hard drive problem, but the internal clanking makes it sound like it could. Silence gets rid of a minor aggravation.

Flash drives also boost performance, although less than I expected. The Dell with the flash drive takes anywhere from 1 to 6 seconds to come out of standby mode, depending on what types of applications were left on. Occasionally, the video that was playing when the computer was put into standby mode starts again. The ThinkPad takes at least 12 seconds.

Starting the Dell after a complete shutdown takes 19 seconds. It takes the ThinkPad 45 seconds to get to the part where I can enter a password. After the password is entered, it takes another 55 seconds before the computer is operational. Some of the slower times on the ThinkPad can be attributed to a slower processor and a more ornate start-up cycle. Even if you don't take that into account, the flash advantage only comes to seconds.

"If it takes one and a half minutes versus two minutes to boot up, are you going to care?" asked Handy.

Weirdly, shutting down both computers takes about the same amount of time. (Flash drives can take minutes off the launch of Outlook, but I couldn't test it because of network problems.)

The drive itself. Samsung puts its flash into a bay that would ordinarily accommodate a much larger 2.5-inch drive. As the market takes off, Samsung will chop down the size of this module.

(Credit: Michael Kanellos/CNET News.com)

Battery power is tough to compare. The Dell has a larger battery pack than the ThinkPad. The ThinkPad is also much older. Still, the Dell with the flash drive seems to last longer than notebooks with standard drives. Fully charged, the battery says it will go five and a half hours, and the time remaining on the battery seems to follow the clock, i.e. an hour of battery time nearly comes to 60 minutes when few applications are on. With eight video streams, the five hours drops to two, but then kicks back up as windows are closed. Handy noted that a flash drive might consume a watt of power while a fast drive might consume 12 watts.

The drawback is the price. The same Latitude with an 80GB standard hard drive currently sells for $869 on Dell's site. Swapping the drive for a 64GB flash hard drive adds $899 to the price. The upgrade more than doubles the price of the notebook to $1,768 and slightly eliminates storage. That's down from the $920 price for the flash drive a few months ago, but out of reach of most buyers. (And it's worse at other vendors. Apple, which started offering flash drives after other PC makers, sells its 64GB flash drive upgrade for $999.)

Photos and high-definition video, among other applications, is also boosting the need for storage, which can favor hard drive makers. Samsung, among others, believes that corporate buyers only need around 64GB of storage, which will be economical to provide in flash in a few years. Consumer laptops, however, come with 160GB to 500GB of storage; 500GB of flash may not be reasonably affordable until 2012, and then consumers might need terabytes.

But if you can offload files onto a backup hard drive, flash could work for you.

Fifty million hard-drive fans can't be wrong.

Seagate Technology reported second-quarter revenue of $3.4 billion and net income of $403 million, or 73 cents in earnings per share. Excluding one-time charges, net income came to $419 million, or 76 cents in earning per share.

Both revenue and income jumped from the same period a year ago, which ended December 28. A year ago, Seagate reported $3 billion in revenue and $140 million in net income.

Analysts, however, had expected $3.49 billion in revenue and 75 cents in earnings per share excluding one-time costs. So Seagate missed a bit on revenue but beat out income expectations by a penny. In the drive business, revenue often gets eroded by price cuts.

The mixed report will add to the uneasiness that has pervaded investors.

The company shipped 50 million drives in the quarter--a record--and even said it experienced some capacity constraints. While PC makers remain the largest customers, a larger number of drives are being sold to consumer electronics companies.

For the current quarter, Seagate said that revenues would likely come in at $3.2 billion to $3.3 billion, while earnings per share would come to 57 cents to 61 cents a share or 62 to 66 cents excluding anticipated charges.

The company further said it expects double-digit growth. The outlook for the current quarter, combined with the results for the two fiscal quarters, put the company on track to achieve 15-percent growth in revenue and 36-percent growth in non-GAAP (generally accepted accounting principles) earning per share in the current fiscal year.

We haven't able to confirm this, but we've heard it now from a couple of people: Hitachi, the Japanese conglomerate, is talking to Toshiba and Fujitsu about forming a new company dedicated to hard drives and storage systems.

The new company would combine the limping hard drive divisions of Hitachi and Toshiba as well as some of the storage systems technology from Fujitsu. Each would own a third.

The three-way deal is being proposed as an alternative to a private equity buyout. Hitachi has been in discussions with equity firm Silver Lake and others about spinning off its money-losing hard drive group, according to sources and news reports. Those talks, however, have not gone smoothly, sources familiar with the discussions said.

For one thing, Silver Lake has a long association with Seagate Technology. Silver Lake took Seagate private years ago, restructured the company, and spun it out again. Seagate is now profitable and growing. However, the firm and the company have stayed friends. Silver Lake founder Jim Davidson tendered his resignation from Seagate's board in December.

A bigger problem, though, might be cultural. Hitachi is still run like a more traditional Japanese company. That is, the company is somewhat wary of outsiders, but is likely more willing to trust other Japanese partners. One observer noted that a Japanese conglomerate seems a better fit than other proposals that have floated about. Another observed that even though Silver Lake and Hitachi have translators, they probably still aren't speaking the same language.

The Nikkei Business Daily has reported that Hitachi would likely sell less than 50 percent of its stock to Silver Lake. A minority would prevent Silver Lake from exerting control. For a firm that earns money by repackaging and reselling companies, that's a deal killer.

Either way, "something has got to happen," said one former hard drive executive. Hitachi eliminated a lot of executives in an October shakeup. It has also continued to lose ground against Seagate and Western Digital, two drive companies that currently are profitable.

Hitachi got into drives when it bought IBM's storage division in 2002.

If a deal occurs, it will likely occur by April 1, the beginning of the new business year in Japan.

In December, Hitachi said that it wants to improve its hard drive business, but has not decided to sell it. It has not formally commented since. Toshiba and Fujitsu have yet to return requests for comment.

CNET News.com's Dawn Kawamoto contributed to this report.

LAS VEGAS--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."

Bill Watkins

(Credit: Seagate)

Watkins, naturally, speaks from personal interest, but he's 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 haven't 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's 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 doesn't 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 U.S. no longer works as well as it once did. However, they have copied it pretty well overseas.

"They are following the 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."

Wednesday morning I visited the new Menlo Park, Calif., headquarters of Zonbu, makers of the low-cost, service-supported Linux computer I mentioned last month (here). I met with Zonbu CEO Grégoire Gentil, who gave me an overview of the company's business plan and a demo of the system. He also offered ... Read more