Disk Drive Sector Discussion Forum Message Board

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Technology Stocks : Disk Drive Sector Discussion Forum

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To: Mark Oliver who wrote (6735)	6/29/1999 9:34:00 AM
From: Robert Douglas	Read Replies (2) of 9256

Mark, Thanks for an excellent “State of the Disk-Drive Industry” post. Their customers treat them as if they deserve no profit, and they accept it willingly as their competition stands constantly ready to replace. They are doomed to this endless cycle. I wonder if it will ever have any moment of improvement as the term cycle suggests? As accurately as this describes the industry, present and past, I can't help but think that this won't be the case forever. It is just becoming too much of an anomaly for an industry to treat its suppliers this way. This is especially so if you believe that the industry supplies valuable technology and innovation. More and more you are seeing agreements between manufacturers that allow for a reasonable profit in exchange for a steady supply of product. IBM has been quite visible in breaking the trail in this regard. If on the other hand, as suggested by some, disk drives are nothing but commodity products, then the path is clear that capacity must be driven out at all costs. The Yahoo poster who said that the worst is over now that all are hurting would be very premature. The pain must get much worse; bad enough to shrink capacity or prevent additions while demand grows to fill the gap. I hope Seagate, or whoever is driving this price war, has the courage to hold out for unconditional surrender. It is the only way out of your endless cycle. Look what Intel is doing to AMD in anticipation of the release of the K7/Athalon. They have struck AMD at the low end; depriving them of profits that will fuel the drive into Intel's most profitable segment. Intel has been brutal in its pricing actions. The HDD business needs a similar bloodshed. Deprive your competitor of profits long enough and they will give up. I have thought that this war of attrition wouldn't need to be fought. Now I see that it may be necessary. If the valuations weren't so pathetic, I would never consider investing in this industry. It violates one of my primary rules. “Never invest in companies where the competition is growing”. -Robert

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