Seagate, Western Digital Face Hurdles

The resurgent hard drive sector is headed for a speed bump as over supply piles up.
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NEW YORK (

TheStreet

) -- A rough road is ahead for hard drive makers

Seagate

(STX) - Get Report

and

Western Digital

(WDC) - Get Report

as rising supply threatens to more than catch up with demand.

The hard-drive duo Seagate and Western Digital have enjoyed a strong rebound as the PC buying cycle kicked in late last year. But now, rising competition and a potential interruption to the tech spending recovery threaten to put the brakes on growth.

Seagate Hard Drive

"We are looking at a significant overshoot," said Rodman Renshaw analyst Ashok Kumar. "With everyone producing at the same capacity," the market is headed to a supply imbalance, said Kumar, who rates Seagate and Western Digital neutral.

The looming financial crisis in Europe hasn't helped brighten the tech picture lately. Last week, Susquehanna Capital analyst Chris Caso issued a note warning that

Intel

(INTC) - Get Report

may face order cuts

as PC makers are forced to raise prices to offset a falling euro.

For hard drive makers, the problem may be made even worse as rival

Hitachi

scrambles to reenter the market by cutting prices and boosting production, said Kumar.

The dim forecast for hard drives adds more gloom to what had been one of the strongest growth sectors in all of tech. Western Digital and Seagate, which tripled their stock prices last year, are down 19% and 22% in the past month.

--Written by Scott Moritz in New York.

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