Paul,
Just to put his remarks in perspective, Chase-HQ analyst upgraded both MXTR and HDD today.
Maxtor Corporation (MXTR) $8.88 - $655MM mkt cap: While C3Q-00 Presents Challenges, C4Q-00 Looks Stronger: Upgrading to BUY
with a $12 price target.
CY00: UNCHANGED $2.7B/0.20
CY01: UNCHANGED $2.9B/0.35
We expect general softness in desktop demand, C2Q inventory builds, and lower pricing to create a challenging scenario for Maxtor to meet
C3Q-00 revenue estimates. However, semiconductor suppliers to the drive industry have either underinvested in capacity, have yield issues,
or are walking away from business to supply alternate industries. We now believe the near simultaneous 20GB/platter ramp will produce a
run on the same components, including recording heads, creating a shortage throughout the industry. As a result, pricing should-at
worst-stabilize and could-at best-increase, driving upside as PC demand rebounds in the strongest seasonal quarter. Additionally, we
believe these shortages could accelerate the long-term industry trend towards consolidation as larger vendor's should be able to garner
greater component supply.
* Quantum HDD Group (HDD) $9.56 - $816MM mkt cap: While C3Q-00 Presents Challenges, C4Q-00 Looks Stronger: Upgrading to BUY
MarFY01: INCREASING EPS $3.4B/(0.15) -> $3.4B/0.08
We expect general softness in desktop demand, C2Q inventory builds, and lower pricing to create a challenging scenario for Quantum to
meet C3Q-00 revenue estimates. However, semiconductor suppliers to the drive industry have either underinvested in capacity, have yield
issues, or are walking away from business to supply alternate industries. We now believe the near simultaneous 20GB/platter ramp will
produce a run on the same components, including recording heads, creating a shortage throughout the industry. As a result, pricing
should-at worst-stabilize and could-at best-increase, driving upside as PC demand rebounds in the strongest seasonal quarter. Additionally,
we believe these shortages could accelerate the long-term industry trend towards consolidation as larger vendor's should be able to garner
greater component supply. We are upgrading Quantum to BUY from Market Perform, with a $13 six-month price target based upon a 0.4x multiple on CY01 sales, which represents 36% appreciation potential.
cnetinvestor.com
disclosure: I'm long HDD, MXTR, RDRT |
