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Technology Stocks : QUANTUM
QNTM 9.990-0.4%Dec 4 3:59 PM EST
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To: Rational who wrote (6116)12/5/1997 9:31:00 AM
From: Chuck Bleakney   of 9124
 
No,
It simply means what it says... that QNTM shifted production
of drives from a production line they owned and operated to the production line they had been using for years for their desktop
offerings. A contractual agreement with MKE. Profit and loss are
still dependant on a reasonable markup... Does anyone have a reasonable markup in this market??? I certainly helps to limit the
exposure though since they don't have to flood the market with even
more product to minimize the bleeding as a vertically integrated company would have to do. But the rest of the overhead is still there.
There's no free lunch. They still have to compete but they have the
ability to be a little more nimble about how its done... that should keep their profit margin on the high side of the average, and that
certainly helps. Price erosion is the real problem, and it doesn't look like its going to go away any time soon, if ever... So the challenge is how to design and build these drives cheaper. That is
not a problem you can solve overnight. It happens one generation at
a time while everyone else is trying to do the same thing. Basically
it's a buyers market... and it's going to remain that way until some
of this production capacity eases. That can happen in several ways...
by the choice of everyone in the business (not likely!) or by some
of the players falling flat on their faces. The question is which
players will falter... The smaller players are at the greatest risk.
I think that the 2 new Korean players and WDC are in the highest
risk seats... (personal opinion!!)

Chuck

Chuck
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