The latest innovation from Dropbox Inc. (DBX) has largely flown under the radar amid a selloff due to uncertainty following the departure of company COO Dennis Woodside.
The cloud storage leader announced during its August 9 earnings presentation that it has completed implementation of its "Magic Pocket" system, a new cloud infrastructure that helps to reduce the amount of real estate the backbone of its storage capabilities utilizes.
CEO Drew Houston explained the new tool and its use of SMR technology at length in the call.
"Dropbox is the first major technology company to test and implement Shingled Magnetic Recording, or SMR, drive technology at scale," he announced. "Today, data stored in hard drives on tracks which are circular paths on a disk surface, on which information is magnetically recorded. SMR drive technology layers new tracks on top of old ones instead of in parallel like conventional hard disk drives, which reduces the physical space needed to store an equivalent amount of data," he explained further.
The resulting structure allows the company to store 14 terabytes per disk as opposed to its previous eight terabytes, significantly reducing the space and material necessary to sustain the cloud infrastructure.
"The new SMR drives are cheaper than traditional hard drives, which will help their margins," TheStreet's Eric Johnsa commented on the program.
Jhonsa's assertion is backed by CFO Ajay Vashee's statement during the earnings that the transition to the new program would help expand gross margin.
Jhonsa explained that Dropbox's fiercely loyal customer base would allow them to keep prices near current levels, while reducing costs through infrastructure, thus creating a more profitable company.
"It would be possible for them to lower prices, but I don't expect them to get into a major price war with Amazon (AMZN) or Google (GOOG). If one of them were really going to eat Dropbox's lunch by undercutting them, they would have done it already," explained.
It is worth noting that prior to migrating to its own infrastructure platform in 2016, the company utilized AWS for all of its infrastructure needs.
However, in the company's IPO filing from earlier this year, the company explained that "more than 90%" of user data has been migrated to their own custom infrastructure, with less than 10% remaining on AWS.