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Technology Stocks : Western Digital (WDC)
WDC 168.90+4.9%Dec 5 9:30 AM EST
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To: William J. Leiby who wrote (7618)11/14/1997 6:37:00 PM
From: Vanni Resta   of 11057
 
William Leiby: Ha! I like your modesty. You may not call yourself a "deep thinker" but you seen to know what is going on sure enough.

You wrote: "How long can Fujitsu, Hitachi, and perhaps Maxtor (Korea) sell at or below cost as some are suggesting?"

Well, I think this is a fundamental issue for WDC that remains unexplored in this thread. Sam gave part of an answer which was interesting. What I was trying to get at is: Do the people who run these companies with the excess DD capacity have the political connections to get backing from the government, or from their banks, via pressure on those banks from their friends/relatives in the government?

If so, does this mean they will just rely on that state support, and be less likely to cut prices? Or if they have this support, will they be less likely to bite the bullet by shuting down the factories altogether? Writing off the production facilities would be good for WDC because it would wipe some of the excess capacity off the map.

And if they lose implicit government backing because the IMF forces that to happen as a condition of the bail out packages, does that mean they will continue to cut prices even more to move a lot of volume in an attempt to get at least something out of their investment?

I haven't seen these issues addressed in any of the DD reports I read from the major brokerage houses.

I thought maybe there might be some Asian expert out there who could address these issues intelligently. I know I sure can't.

Happy Investing!

Vanni
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