Mark,
My guess is that things will get worse before they get better. One reason is seasonal factors. But the more significant reason is that Seagate management wants to convince people that their LBO bid of a PSR of about .20 is reasonable enough to vote for. They will keep the pressure on until the takeover is history. After that, I would expect some lightening up. We will magically albeit somewhat slowly return to profitability. In a couple of years, the sector will be very profitable. PSRs will range from .6 to 1, or perhaps even slightly above 1. Seagate will go public, and will demand a PSR of about 1.2-1.4, a "just" premium to the others which will reflect their dominance in the enterprise sector. Funds will eagerly buy them, and everyone will say what wonderful managers these people are, how brilliant are Messrs Luzco, Perlman, and MacNamee. Of course, before the drive unit goes public, they will probably sell the software unit for between $2 and $3 billion. And by the time the drive unit does go public, they will have revenues of $15-20 billion.
I do think that HDD and Maxtor will be good buys this summer, after this next dip (maybe even WDC, who knows!). They are probably good buys even now for the next couple of years, but will probably go lower as everyone agrees what a "disaster" the sector is; gee, those Silver Lake people are like saints for taking Seagate out of public hands, I do believe that we actually ought to pay them for their trouble, heck, let's not even make it $5/share.
Cynically yours,
Sam |
