To all on this thread
Here are some notes from a recent RDRT CC which I came accros on the DD Discussion thread. It would appear that QNTM will be upstaging to 2,8gig platters this qtr.
The conference call was recorded 1/21/98. Read-Rite representatives were Cyril Yansouni, CEO; Alan Lowe, Pres; John Kurtzweil, CFO; R. Jackson, Counsel; Steve Baldwin, Senior Director, Investor Relations.
The financial press release had been distributed. It is not a part of these notes, but a link is provided to the Read-Rite website (the press release was not yet posted as of 1/22/98) or alternately on the Yahoo website ( this may be expire soon) Company Press Release on Yahoo. (3 pages).
Mr. Baldwin opened by reading the "Safe Harbor Statement"
Mr. Kurtzweil presented highlights of financial report beyond the press release.
Shipped 1.6 million MR head stacks in Q1, an increase of 1 million from the 600
thousand shipped in the prior quarter. Had two customers over 10%: (in alphabetical
order) Maxtor and Western Digital. These two combined for 73% of revenue.
After the March quarter, will build inductive heads only for the removable market.
The company experienced pricing pressure and lower volume for absorption of fixed costs. These resulted in reduced gross margin. Capital spending plans are being reduced from $300 MM in FY98 to $200 MM. Depreciation will be reduced in FY98 as a result.
Forecasting will be difficult for several quarters. The march quarter (Q2) is expected to be the bottom. Expect a loss in Q2, breakeven in Q3.
Mr. Yansouni characterized Q1 by turmoil and changes in the industry. Company has
three-point plan to deal with it.
Technology Objectives
Expect 80% of Q2 revenue to be MR. Working on AMR (Advanced MR?)
beyond 3 gbit/square inch. MR in pico form factor - currently in qualification GMR
at 4.2 gbit/square inch sampling this quarter Working on 12 gbit/square inch
Mentioned Optically enhanced winchester technology, have a headstart in this
program and are building competency.
Operational Action
Using period of slower demand to improve operating efficiency/excellence. Expect
to improve capital asset utilization
Persuing Customer Opportunities
Japanese joint venture Read-Rite-SMI persuing Quantum/MKE with 2.8
gByte/platter development activity. Seagate relationship formalized through
development agreement
Question and Answer Period
Note takers comment: I have not tried to capture the specfic questions, but just the
highlights which emerged from the Q&A dialog.
Areal density continues to improve, no slow down is expected. This may have a tendancy to reduce heads per drive and platters per drive as the areal density increases more rapidly than users demands for storage capacity Competition - (CY)
Mentioned IBM, TDK and Yamaha as key competitors Results included $2.6MM foreign exchange loss due to overhedging. Had hedged more than foreign currency spending required due to lower volume. Regarding gross margin on MR heads - MR heads are priced on the same business model as TFI heads. Manufacturing yields on MR are improving.
Revenue breakdown - MR was 45% in the quarter, 50% at the end of December. Shipped 1.6 million head stacks, up from 600K in previous quarter.
Regarding possible shortage of head stack capacity, capacity is not expected to be a problem. Note - there was a discussion of head gimball assembly utilization and yield which I did not follow, but I think the questioner and answerer did not understand each other.
Pico versus Nanoslider form factor - This is a customer driven issue. All customers have activity moving toward picoslider; expect greater than 50% by the end of FY99. New activity like Quantum-MKE happening most quickly.
R&D is well above prior quarters 5% spending rate. Reasons for increase: Top line not high enough, some wafer fab expense being charged to R&D, Read-Rite/SMI spending. In the longer term, expect R&D to return to 5.5 - 6%. Revenue plan going forward
Q1 $261 Million (Actual) Q2 Down 10-20 % from Q1 Q3 Back up to Q1 level
Q4 and beyond - up from there
The company is conserving cash Regarding capacity at specific product points 1.7 gB/platter and 2.1 gB/platter: All MR is above 1.7 gB/plater, some 2.8 gB/platter is possible this quarter.
Regarding HSA/HGA mix - expect there to be some changes based on specific customers. Two large customers are taking HSA products. Seagate and MKE will be HGA.
Currency exchange rates, with dollar above120 yen, is this a problem or advantage? No.
Seagate is expected to source 10-15% of its requirements outside, complimenting internal capacity. Efforts are underway to capture this business.
IBM is both producing for in-house and is in the merchant market.
Capacity of 2.5 gbits/sq.in. will enable 3.3 - 3.6 gB/platter by the end of 1998
Alan |
