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Technology Stocks : Hutchinson Technology, Inc.

HTCH 4.000

0.0%

Oct 6 5:00 PM EST

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To: Mark Oliver who wrote (1424)	12/11/1999 1:47:00 AM
From: Tom Simpson	Read Replies (1) of 1487

<<Do these guys thrive by killing each other?>> "Thrive" is not really the appropriate characterization. This is more like the dry season on the Serengeti and the lions remaining struggle just to survive until the rains come and the wildebeast return. <<Will their customers allow anyone of them to fold?>> I wouldn't count on it. From what KRP and Magnecomp say in various releases and financial reports Seagate damn near put KRP out of business. KRP is in Thailand where they supplied mucho parts to Seagate's huge Thai operations. Apparently Seagate took a run at doing their own suspension thing for a while and took KRP to the brink of bankruptcy. Magnecomp then made a play to pick up KRP's bank loans at 50 cents or so on the dollar and take over KRP. But Prudential Asia seems to have stepped in instead, and given KRP a new lease on life. <<When you look at Magnecomp, do they give much info on their customer base?>> Not a lot. No one besides Hutch breaks down their top 5 customers by percentage by quarter...and even Hutch trails that info by 5-6 months. Magnecomp is listed on the Singapore exchange and reports semiannually and minimally. "Microactuation" is not something I know a whole lot about. The task there is to keep head more perfectly centered in track, exactly how I don't know. I would guess it is most likely based on some analog head sensor signal feeding back to make fine adjustments to the positioning coil. That would involve another trace or two and possibly a little chip to process the signal. But it could conceivably be something to strain the suspension mechanically to achieve the same result and that would likely be a very different animal. It is not likely that adding traces or a chip to the suspension is going to fundamentally change the TSA manufacturing process. The thing to keep an eye on is suspension units and asp's. As long as gross units don't cave, HTCH will be making money just because of a rising asp due to a richer TSA mix. If you look at their 3rd qtr 10Q you'll see that depreciation and amortization as a pct of cost of sales jumped from 11% in 98 to 18% in 99 even as they went from losing money to making a little money. Of course they need some of that cash flow to cover the new debt but as long as they can at least hold flat unit volume and keep growing their ASP they will do just fine. But I don't know Mark. Wasn't it yesterday that some company with 17 million in annual revenue came to market and by the end of the day had a market cap of a billion or so? Has the world gone nuts, or is it just that I don't get it? Suggestion for you...go to yahoo finance and get to the HTCH chart (SI chart has bad data..missed a split). Hit the max button for a multiyear picture. You'll see...this is a very cyclic business. By the way, I took just a little nibble of INVX finally. I really admire their management. They took over the wire market and somehow managed to exit relatively unscathed when it crumbled to dust. I'm not going to be surprized if there is a second act for them in flex assemblies instead of wires. Take care....Tom

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