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Rising prices and supply chain uncertainty from the Thailand flooding are starting to adversely impact the storage industry as a whole, according to normally tight-lipped storage industry executives forced to address the issue as part of their quarterly earnings releases.
NetApp, Dell, and Overland Storage all answered questions about how their businesses are being impacted by the shortage. And while their answers were less than complete, they did provide some insight into how the shortage will play out in terms of storage product availability and pricing through the middle of next year.
The hard disk shortage caused by massive monsoon floods which have inundated much of Thailand, including many hard drive and component factories, has become a common thread of concern among observers of the storage industry.
Executives of NetApp, which on Wednesday reported its second fiscal 2012 quarter financial results, told analysts and CRN that the company has been building up enough inventory to last through the end of the year, but said the impact of the shortage on the storage industry going forward is still a great unknown.
NetApp made large purchases of hard drives as soon as word of the potential impact from the floods came through, said Steve Gomo, NetApp's executive vice president and CFO.
"We believe we will have sufficient drive inventory through the end of December, but it's difficult for anybody to predict the business impact beyond that," he said.
Georgens said the hard drive situation makes it difficult to offer future financial guidance, as the news from Thailand is constantly changing.
"The impact of the Thailand flooding could potentially be the biggest swing factor on both our top and bottom line in the second half," he said. "The large buy we did as this was all unfolding should sustain us through a good part of Q3, but probably not all of it. Although enterprise-class drives are considered to be the least impacted, we still anticipate some amount of supply and pricing complexity."
Georgens also said it is hard to determine how the Thailand drive situation impacts operating expenses. "It's going to be hard to predict, and I'd hate to just kind of jerk the organization around ... [with] a set of data points that are changing every day," he said.
Nicholas Noviello, senior vice president of finance and the controller of NetApp, said the shortage has the potential for impacting the rollout of the new FAS2240 small business storage appliance which NetApp unveiled earlier this month.
Availability of the new FAS2240 is built into NetApp's financial guidance, Noviello said. "Certainly [availability] gets a little bit more complicated once you get into the new year... Those overall constraints on drives from Thailand and macro [economic factors] being there that we have to consider when we built the guidance," he said.
The hard drive situation is difficult for all storage vendors, Georgens told CRN.
"Fortunately for us, we have a multi-source strategy," he said. "Unlike in the PC industry, a lot of enterprise drives are produced outside of Thailand. The industry is still going forward on inventory built up before the storm, and we're waiting to see what happens."
Dell, which Tuesday reported its fiscal third quarter 2012 financials, is, like the storage industry as a whole, suffering from the Thailand floods, said Jeffrey Clarke, Dell vice chairman of global operations and end user computing solutions.
The flood waters in Thailand are still receding, which makes it difficult to pinpoint the magnitude or duration of the hard drive shortages, Clarke said.
Next: Hard Drive Shortages Making Price Predictions Tough
