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Stormy waters ahead for disk drive market

Analysts predict OEM uptake of CD-RW

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CeBIT 2000 It's going to be a long, hard slog for players in the European disk drive market this year, according to IDC. Bob Peyton, director of European storage research at the analyst company, today warned hard drive manufacturers to batten down the hatches as he made his predictions for the rest of the year. "The hard disk drive market will no be fun in 2000," he told CeBIT attendendees. According to IDC, this area of the storage market can expect to see only moderate volume growth, accompanied by continued price drops. In 1999, desktop PC disk growth slowed abruptly to 15 per cent - from 30 per cent the previous year - partly as the upgrade market in the channel dried up, and partly due to the influx of grey market drives. There were between one and two million grey drives on the market in Q4 - taking an estimated $200 million out of the year's total sales figures. But shipments in the second half of 2000 would be up "substantially" from the weak base established last year, said Peyton. The biggest opportunity for making some cash out of this area of falling margins will be in the re-writable CD (CD-RW) market. It will be a two-horse race between DVD-ROM and CD-RW as the CD-ROM replacement - "In 2000 DVD-ROM will win on volume for CD-ROM upgrades, but CD-RW is where the money is," according to Peyton. He said to expect increased CD-RW OEM acceptance. IDC expects 12 million DVD-ROM drives and 10 million CD-RW drives to ship in the area in 2000. DVDs will be 1.5 times more expensive than CD-ROMs, and the CD-RW costs more than twice as much as DVDs - "but with a substantial advantage in functionality". "The CD-RW, at less than $100, makes it an OEM candidate," said Peyton. Currently, the annual CD-ROM market is $1 billion and dropping, the CD-RW sector - an area led by HP - is $1 billion and growing. The DVD area is $400,000, but increasing rapidly. "DVD is gaining acceptance in Europe, but CD-RW is poised to attack the OEM market," added Peyton. "All other optical/removable technologies are suffering." ®

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