from yahoo part 2
Look at the Big Picture (Part 2)
Romandacil_II
May 5 1998
12:12AM EDTHere are the excerpts from the Fool writeup and the WDC/IBM announcement I cited. Especially read that WDC/IBM announcement more carefully and critically! Remember, WDC is trying to prop up its stock price, too!
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From the Fool's Daily Trouble:
Although its products are used mainly in 3.5" disk drives (98% of sales), the company believes it supplies a broader range of drive products (52 in 1997) than any
other independent supplier. On the other hand, its 107 million HGAs sold last year went to just six customers, with Western Digital, Quantum (Nasdaq:QNTM -
news) , and Maxtor accounting for most of its revenues (51%, 18%, and 13%, respectively versus 43%, 29%, and 12% for FY96).
The shift to higher performance MR head technology should be dramatic. In FY97, Read-Rite sold 24 million MR heads, increasing MR product sales to $280
million (24% of revenues) from just $34 million the year before. MR products should account for the majority of sales in FY98.
The good news is that the market has now squarely adopted MR technology, and Read-Rite is coming along. In the first quarter (ended in December), MR heads
accounted for 46% of sales. Moreover, Western Digital expects to see 80% of its products using MR technology by the June quarter (up from 20% in the
December quarter).
That suggests that Read-Rite's overall sales should move rapidly to MR over the next few months. Plus, Western Digital's near-term dependence on Read-Rite for
supply may support gross margins for now. Read-Rite also has been qualified as a suppler by five customers for the next generation 2.8 gigabyte MR heads.
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SAN JOSE, Calif., May 4 (Reuters) - Western Digital Corp and International Business Machines Corp (IBM - news) said Monday they signed a letter of intent on
a supply and licensing agreement under which IBM would make its leading-edge hard drive technology available to Western Digital.
As currently planned, the agreement calls for IBM to supply Western Digital with its areal-density giant magnetoresistive (GMR) heads and other components for
desktop hard disk drives.
IBM introduced the GMR head technology last November. At that time, the company said the new heads -- which are the parts used to read and write data to disk
drives -- could double the storage capacity of desktop disk drives.
For IBM, the deal means new revenues for its original equipment manufacturing (OEM) business, which has been one of its main sources of revenue growth in
recent periods.
Western Digital said its initial plans also call for using IBM technology and designs to integrate the parts into drives and said it expects to introduce desktop drives
based on IBM products and designs in the first half of calendar 1999.
Financial terms were not disclosed and the entire arrangement is subject to completion of a definitive agreement, the companies said.
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