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Technology Stocks : Read-Rite

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To: Dennis R. Duke who wrote (3679)	7/15/1998 1:49:00 PM
From: T Bowl	Read Replies (1) of 5058

Dennis - IMO the RDRT CC tonight will be very grim. I point to several aspects from the SEG CC that applies to RDRT's market = WDC, Maxtor, Samsung. All primarily desktop drive players... Indy supply into the desktop market is NOT a good place to be right now IMO. ****SEG NOTES that I think apply to RDRT(all bad, I could find no good ones)* '- desktop rev $552mil down from $707mil - we don't expect significant industry improvement in the desktop market during the SepQ. - desktop environment was extremely competitive. The price erosion was quite drastic - more siginificant than last Q. - We think channel inventory is about 7.3wks which is slightly down from last Q. Our view that conditions will staty very competitve. - We have 2 outside vendors that are very competitive on the pgm. - external head supply goal is 10-20% external. We source those at different levels. 1) wafer - lowest level possible, 2) sliders, 3) HGAs. Overall % at all levels was 7% dominated by wafers. Flat with previous Q. That will change going fwd. Next Q expect about 12% external with maybe 2% at HGA level - the bulk still at wafer level. Q=> have you heard from any other box OEMs other than HP that the DD industry might be pushing too hard and increasing bit densities and are actually ahead of the curve and than the user demand isn't demanding the same sort of upticks that they have in the past? - don't confuse areal density development with total capacity per platform. I talked about that at the BS conference. Even if you have a flattening of total storage requirements, in some since when this happens you need to push areal density even harder in order to reduce components and there reduce costs. Yes we believe that hardware technology is ahead of software - we don't know whether this is a 9, 12, or 18month phenom - we won't speculate on that. todd

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