Opposing Camps Could Slow Advances In Flash Memory30 January 2005
It's a lot easier to move files among PCs and consumer electronics products nowadays, in no small measure thanks to a tiny storage device called a USB flash drive.
Consumers are buying them by the millions. But the desire to be the spearhead of the next generation of flash drives has led to an industry fight that threatens to slow the advance of these popular products.
No. 1 USB flash drive seller SanDisk (NasdaqNM:SNDK) and partner M-Systems (NasdaqNM:FLSH) have unveiled a standard for the next generation of USB flash drives.
But they're running into stiff opposition from others, led by members of the USB Flash Drive Alliance, the main trade group for this field.
The stakes are high. Researcher iSuppli forecasts makers this year will sell more than 60 million
USB flash drives for $4.4 billion. It expects sales to surpass $10 billion in 2008. M-Systems said USB drives accounted for 58% of its sales last quarter, while SanDisk late Thursday said that product accounted for 38% of its sales, up from 22% in fourth-quarter 2004.
Quarterly results beat expectations, and its shares rose 12% on Friday.
Plug And Play
USB stands for universal serial bus. It's a technology standard that lets people plug printers, keyboards and all kinds of products into PCs and other consumer electronic wares and use them right away. No need to download a program to operate them. Some call it plug and play.
Flash drives for USB ports are about the size of a pack of chewing gum.
People can download tons of data onto one of these drives, unplug it, carry it with them wherever and then plug it into another device to get to the data. No hassles.
SanDisk and M-Systems unveiled their U3 flash drive on Jan. 7 at the Consumer Electronics Show in Las Vegas.
"The U3 initiative will take USB flash drives beyond simple storage," said SanDisk Chief Executive Eli Harari in an interview.
"The USB flash drive is a great product, but it's underutilized. It has intelligence greatly beyond floppy or Zip drives. We need to exploit that."
Basically, U3 is the software and design for a flash device. The two companies hope it will become the next de facto USB flash design.
"U3 will be a benefit to users, which is key," said analyst Alan Niebel, head of Web-Feet Research in Monterey, Calif. "But whether it becomes a standard depends on how many developers get behind it."
The U in U3 stands for "you," and the 3 is for simplified, smarter and mobile. SanDisk and M-Systems tout it as an open platform. The industry debate largely centers on the meaning of "open platform." Software developers can use U3 code for free, but SanDisk and M-Systems will charge U3 drive makers a licensing fee.
Pair Pushes U3
SanDisk and M-Systems are striving to enlist software makers to support U3. They want them to write new programs, especially security software, that will improve U3.
Until now, there weren't any technical standards that developers could use to create software programs to work with USB flash drives.
SanDisk and M-Systems say a dozen software companies already are developing applications for U3. The companies include security firms McAfee (NYSE:MFE) and Checkpoint Systems (NYSE:CKP).
But then, it doesn't cost the software developers a cent. It would cost drive makers, however.
SanDisk and M-Systems are trying to mislead people, says Steffen Hellmold, president of the USB Flash Drive Alliance and a manager at SanDisk rival Lexar Media (NasdaqNM:LEXR).
"There were a couple of things in the Consumer Electronics Show briefing on U3 that were a little misleading," he said. "One is that they said U3 is an open platform."
If companies must pay licensing fees, then U3 isn't an open standard, he says.
The USB Flash Alliance last month said it's changed its focus from a marketing group to a standards-setting body.
The 16-member group includes big players such as Microsoft (NasdaqNM:MSFT) and Samsung ElectronicsSSNGY.PK.
Harari declines to give details about the licensing fees. He points out, though, that SanDisk and M-Systems put out the money for the initial research.
The fees, he says, will almost entirely go toward further research to continue to improve U3. So, he says, everyone will benefit and the load will be shared.
The two sides are grouping into opposing camps, and that spells trouble, says analyst Niebel.
The USB market needs full agreement on basic standards, he says, or advances will be delayed.
SanDisk and M-Systems say they won't wait around. Harari says they plan to ship the first U3 USB flash drives by this summer.
Source: Investor's Business Daily via Yahoo
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