SAN FRANCISCO --
dream of seeing flash memory take root in the PC looks better than ever.
Now comes the hard part.
A slew of recent announcements suggest the idea of solid state drives -- PC hard drives consisting of flash memory chips rather than rotating magnetic discs -- is starting to catch on. But these promising developments for flash technology also point to the challenges facing SanDisk.
As SanDisk rides flash memory into the computing world, it will be competing on unfamiliar turf, where an entrenched group of players have long held sway. Breaking that barrier, with a mix of technology and aggressive dealmaking, will determine SanDisk's fortunes in what could soon count among the most significant markets for flash memory.
SanDisk trying early on to position themselves well, but it's true that they will have more of an uphill battle" in the PC market, says Lazard Capital Markets analyst Daniel Amir.
SanDisk shares, which closed Friday at $51.29, are up about 30% since March as Wall Street sees hope that prices for flash memory have stabilized, following sharp declines earlier this year. The adoption of flash in PCs, which SanDisk has promised will become a growth driver next year, is also whetting investors' appetites.
A heavyweight in the retail market for consumer flash memory products, SanDisk is decidedly undersized and unconnected in the PC realm, where component suppliers like
have relationships with the big computer makers that stretch back decades.
South Korea's Samsung, for instance, provides PC makers with several staples, including DRAM memory chips, flat panels and traditional, magnetic hard drives. That gives Samsung a great deal of influence with PC makers, as well as leverage to push a broad bundle of products, says iSuppli analyst Nam Hyung Kim.
Last week, Samsung announced a deal to equip two
notebook models with 64GB flash hard drives. By year's end, Samsung said that Dell will include its flash memory drives across its line of Latitude corporate notebooks and Precision mobile workstations.
That's not great news for SanDisk, which
struck a deal with Dell earlier this year to provide 32GB flash drives in Latitude notebooks.
A Dell spokeswoman said that SanDisk drives will continue to be offered at 32GB capacities in Latitude notebooks, but Samsung will be featured in Latitudes with the 64GB drives.
recently announced that its high-end notebooks will soon have the option of featuring 64GB flash drives. An H-P spokesman said he could not confirm which company is providing the solid state drives, although he said he believed H-P was sourcing the drives from multiple vendors.
Mike Wong, a spokesman for SanDisk said that if its flash drives were in the H-P notebooks, SanDisk would have made an announcement. He notes that the company recently announced a deal providing solid state drives in
And Wong notes that SanDisk's 2006 acquisition of M-Systems, which was focused on selling flash memory to original equipment manufacturers, will help it transition into the PC industry.
Of course, none of these deals will make or break a company's solid state drive plans at this point in the game, as flash drives for PCs represent a mere blip among overall flash memory sales. But expectations are for sales of the solid state drive to ramp up quickly, as prices become more affordable.
iSuppli projects that solid state drives will represent 20% of all flash memory demand by 2011, up from essentially nothing in 2006.
Flash memory, which retains data even when the power is switched off, is a popular means of storing songs and images in gadgets like MP3 players and digital cameras. In a PC, flash memory has advantages over magnetic hard drives in that it consumes less battery power, retrieves information faster and is more resistant to the everyday bumps and jolts that laptops are subjected to.
The PC business is particularly attractive to makers of flash memory chips because of the large number of notebook PCs that are sold every year (research firm IDC expects worldwide shipments of 105 million laptops this year) and because solid state hard drives require so much more memory than other flash products.
SanDisk sells some flash cards for cell phones with capacities measured in mere megabytes, compared with as much as 64 gigabytes of storage in its solid state drives.
Although SanDisk is a newcomer to the PC world, the company's track record of forging strong partnerships in the retail space and its technology should serve it well.
Lazard Capital's Amir believes SanDisk's portfolio of products and intellectual property will help it get a foothold in the PC business.
Among the most important of these technology assets is the controller chip that operates alongside the flash memory, particularly a controller that works with a flavor of flash known as MLC.
According to a recent note by American Technology Research analyst Doug Freedman, SanDisk has developed an MLC controller designed for flash hard drives used in low-end notebooks sold in developing nations. And Freedman writes that an MLC controller for mainstream flash hard drives is not far behind.
SanDisk also has its own supply of flash memory, through a joint-venture with
. In the volatile world of flash memory, where sharp swings in prices and supply are the norm, having a guaranteed source of flash can make all the difference (
as the troubled tale of Lexar Media shows).
That could give SanDisk an edge, as it seeks to fend off competitors like Seagate, a maker of magnetic hard drives, which recently announced plans to roll out flash-based hard drives in 2008.
For its part, Seagate contends its relationships with the world's PC makers, and its experience and expertise designing storage products, will help it move into solid state drives. Whether a hard drive is magnetic or flash-based, Seagate says the real key is in the system design and in optimizing the firmware that controls the communication between the storage drive the PC.
"That's where the critical value add is; it's not necessarily in how to stack the flash chips," says Seagate spokesman Woody Monroy.
As SanDisk seeks a place on the PC stage, the tricks it does besides stacking chips will be the main event.