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Disk drives in the driver's seat?

Last year may end up being just a bad memory as the industry could be poised to reap revenue growth rates of more than 20 percent in '99, a top analyst predicts.

The disk drive industry could be poised to reap revenue growth rates of more than 20 percent in 1999 after a precipitous drop last year, a top analyst predicts.

Last year, revenues for computer hard drive makers dropped by almost $2 billion in aggregate, said Paul Fox, a data storage industry analyst with NationsBanc Montgomery Securities at the company's annual Technology Week conference.

Things are looking up for the storage sector in 1999, though. Fox is forecasting unit growth of 25 percent to 174 million units and revenue growth of 21 percent to $30.3 billion.

The boost in revenues will come in part from technology changes outpacing price cutting measures. Improved recording heads, along with faster drives and continuing increases in storage capacity will help industry players such as Seagate Technology overcome price cuts on older, lower margin products.

Optimistic investors today boosted a number of storage sector stocks in early afternoon trading. Seagate rose 5.19 percent to 39.25, Maxtor was up 8.27 percent to 17.1875, and Western Digital was up 3.88 percent to 13.375.

Irregularities in demand coupled with excess supply triggered financial woes for many companies last year. Fox noted that while total shipments of disk drives rose 14 percent to 139 million in 1998, total revenues fell 7 percent to $25 billion, reflecting the intense pricing pressure that affected the industry last year.

Seagate, based in Scotts Valley, California, saw its 1998 market share in the disk-drive business fall 2.6 percentage points to 20.5 percent, according to Palo Alto, California-based TrendFocus, which covers the disk-drive industry.

Maxtor almost doubled its share to 11.6 percent in 1998 from 6.5 percent in 1997 as the company benefited from supplier deals with high-flying Dell, as well as other PC manufacturers such as Compaq and Gateway.