For those of you who managed to stay awake in your Economics class, you’ll recall that — between inflation and deflation — the latter is thought worse, and is associated with economic depressions.
During deflationary periods, prices for goods fall at such a rate that consumer behavior changes.
Why buy something today when it’s virtually certain that its price will fall tomorrow? There’s now a strong economic disincentive to carry any inventory at all — defer purchases as much as possible, and buy only what you need when you absolutely need it.
While it’s true that I now work for VMware, I came from the storage hardware business. I scrutinize analyst reports, earnings announcements, etc. And I think I could construct a plausible argument that we are in a sustained deflationary period for storage capacity: disks and arrays.
If that’s true, there are plenty of implications all around …