From Bear Stearns this am.
<<Seagate Technology lnc- (SEG - $30) Attractive Price Target $33-50 Market Cap: $7.2 Billion Index. S&P 600
Andrew Neff
Despite a 6/28 pre-announcement. SEG reported Q4 of $0.30, below our lowered $0.34 estimates, due to greater than expected pricing pressure in desktop drives at the end of Q4. However, overall unit demand appeared healthy. SEG may be under pressure initially because investors were surprised to hear that Q1 and Q2 could be unprofitable due to continued tough desktop pricing. We reduce our estimates, but we think estimates are meaningless at this point given the lack of visibility. Our valuation is based on SEG's equity stakes, excess cash position, and valuation of the disk drive operation on a price/sales basis. The market Is valuing SEG's disk drive operation practically free (around $4), or 14% of run-rats sales - a discount to the valuation of Maxtor and Western Digital, which is ridiculous. The problem is that industry conditions deteriorated more, and could still get worse. We see 2 possible outcomes: 1) Either the price war abates, leading to a recovery in valuations, or 2) pricing worsens, which could hasten consolidation. Heads you win, tails you Win. We think timing has to be in the next 1-3 quarters. We maintain our Attractive on SEG. We think SEG Is best-positioned to survive this turmoil due to its strong balance sheet and ownership of Wading-edge technology.>>
-Robert
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