The incremental value you allude to is just this in my opinion:
Disk drive capacity and speed have been increasing at an increasing rate per year. Used to be 40% annually, now in the 90's that's upped to 60% annual expected growth in performance. To my knowledge, (limited), the price of hard drives has stayed pretty consistently the same--couple hundred dollars is the sweet spot for average performance year after year I believe. How I see KM as so significant is expecting that now normal 60% drive performance growth, ON TOP OF A KM INDUCED 30-40% PERFORMANCE IMPROVEMENT, meaning whoever implements KM gets a 30-40% performance improvement jump on their competitors, or about a year's worth of R&D expenditures for whatever peanuts AXC charges. To my knowledge, and the assumed logic of most posters here, is that the disk drive industry is so competitive that it seems manufacturing efficiencies and vertical integration and whoever can plow the most $ back into production capacity has created a mostly herd like mentality among the big 7 left in this brutal game. Indeed, why are most going to MR when they're dealing with initial dismal production yields below 50% in all cases except IBM? Because you have to follow the leader here or get left permanently behind in chapter 11, like the 50 other disk drive makers of 15 years ago. It's this herd mentality that I'm counting on to drive all or almost all to KM over the next year, hopefully with several significant signups in the next 4 months, as Chairman Bramson has given us some cause to expect.
The big question everyone is asking but no one can know is how much AXC will charge, and how much pure profit they'll make, from selling a simple 30-40% disk improvement that's fully patented from copycats (we hope). I remember from a not too long ago post someone quoted from Redchip REview, which seems to have the best publicly available info at this time, that estimates for the benefit to disk drive manufacturers are between $13-35 per disk in profitability improvement, which sounds like a 10-15% margin improvement, this in an industry that barely survives on the slimmest of margins. Looked at another way, in an industry that'll sell ~150M disk drives in 98, the real year KM could come into it's own, at an average profit improvement of, say $20 per disk, that's a $3Billion dollar industry wide price/performance improvement! How much of that 3B improved margin will AXC take as it's due for being solely responsible for the added wealth? What's that going to be worth paying for? AXC better not give this unique patented easy improvement away for a song!
Also, in reference to the Technical Analysis post, thanks, but what does a cup and handle presage? Is it a long term bullish, short term bearish or neutral position, as we're all expecting here? I've definitely heard of the term, but am not familiar with it's meaning. Thanks for your post. My general view is now that AXC will continue to waffle around, maybe drift lower in the short term, but it's basing for a tremendous upward move with the steady drumbeat arrival of hoped for coming KM announcements. One drive manufacturer down, 6 more to go! Sic em, Bramson and KM! |
