Ken, I'm hanging on to WDC despite the current weakness. Looking forward to earnings next week. Today's large block activity was 2:1 ratio of selling to buying, but the blocks weren't as large as has been normal and it looks like WDC traded in kind with the market.
WDC has been getting some press of late in tech magazines:
techweb.com
WD Subsidiary Challenges Tivo, ReplayTV
Oct 16, 2000 (Tech Web - CMP via COMTEX) -- Move over, Tivo and ReplayTV. There's a new kid on the block: Keen Personal Media, a subsidiary of disk-drive manufacturer Western Digital.
For about a year, only Tivo Inc. (stock: TIVO) and ReplayTV Inc. have slugged it out in the personal-video-recorder (PVR) space, supplying services to dedicated boxes that allow "timeshifting," the ability to "pause" live TV by recording it on an internal hard drive.
Now, executives at Keen say they plan to sidestep the PVR market entirely and take their TV4Me software to the general-purpose set-top box market at large, while developing "SideCar" PVR peripherals to retrofit existing set-tops.
The company has also signed a contract deal with set-top manufacturer Scientific-Atlanta Inc., pushing its credibility further.
"We think we have a unique strategy," said Greg Kalsow, vice-president of marketing for Keen Personal Media Inc., Irvine, Calif. "We believe that marketing this through multiple system companies while doing an open-architecture PVR dovetails with the concept of a digital appliance."
Keen executives say their architecture will be open, and will not use the proprietary formats of the Tivo and Replay boxes.
Microsoft Corp.'s WebTV subsidiary, by contrast, gives its users PVR capability through the WebTV software, but the box is also used for Internet access and other functions.
EchoStar Communications Corp. (stock: DISH) has also melded the WebTV PVR capability within its DishPlayer DBS decoder box, and analysts confirmed that the DishPlayer box has outsold both the Tivo and ReplayTV boxes combined.
"Anybody who's going to get into the PVR market is going to look at it as an integrated product and not as a standalone market," said Myra Moore, analyst with Digital Technology Consulting (DTC) in Dallas.
Keen's broader approach will allow the company to address the broader market for digital set-top boxes, which Forrester Research Inc. expects to grow to 28 million units in 2004.
In-Stat Inc., by contrast, believes the combined PVR market will barely break 300,000 units this year, expanding to 6.5 million units in 2003.
In effect, the company and its customer, Scientific-Atlanta, believe that personal-video-recording is a service, and one that will be offered on as many products as possible.
"We believe the market for standalone PVRs is pretty limited," agreed Bill Wall, technical director for subscriber services at Scientific Atlanta, Atlanta.
Although Keen will offer a user interface if requested, Scientific-Atlanta found Keen's willingness to drop the GUI-as well as the Keen brand name-from the set-top box was the deciding factor.
The TV4Me technology, minus an engine that will recommend shows based on personal favorites, will be tied to Scientific-Atlanta's PowerTV OS and forthcoming versions of the Explorer set-top box.
"In the user interface we have a lot of experience," Wall said. "But what we really needed was just help in the lower-level control of the disk and the operating environment."
A spokesman for ReplayTV, Mountain View, Calif. said he viewed Keen's service as complementary, not competitive.
"We're encouraged by other hardware manufacturers getting into this space," he said. "As you know, there are two basic levels of software in the system -- basic DVR software like pause, play, record. But our revenue model really revolves around service program guide, doing things like promoting programs through the guide, doing e-commerce, and targeted advertising."
Still, the news could prove to be another weight on Tivo's already-depressed stock, which has dropped from a peak of just over 78 in the past year to its current close of 13 1/8.
Asked for comment, two analysts who follow Tivo's stock, Spencer Wang of ING Barings and David Lee Smith of Dain Rauscher Wessels, both said they were unfamiliar with Keen.
"The only thing we have thought is that this [PVR] thing is headed toward set-top functionality," said Smith. "Anything that helps that is better for this company."
Keen was incorporated in July 2000 as a wholly owned subsidiary of Western Digital, Irvine, Calif., and part of WD's efforts to diversify into software and services, according to a company spokesman.
Kalsow sad the company expects to receive additional outside funding, potentially through corporate partners and other sources.
Keen will pull in revenue through licensing agreements with set-top manufacturers, and by tailoring its software and related services to pull in additional advertising-related revenue.
The announcement is also somewhat surprising, given that WD has been a relatively late entrant to the PVR space.
Quantum Corp. (stock: DSS), for example, has been a leading supplier of PVR disk drives, and then software division at Seagate Technology Inc. (stock: SEG) software division has reportedly investigated a similar venture, analysts said.
WD (stock: WDC), meanwhile, has a presence in both the WebTV and AOL Inc. (stock: AOL) set-top boxes, but just announced a set-top optimized Protg drive last week.
And that leaves the door open for even more related PVR-software announcements by traditional disk-drive companies, said analyst Mike Paxton of In-Stat Inc., Scottsdale, Ariz.
"Tivo and Replay have generated a lot of interest among other storage companies," he said. "Here is the opportunity to not be a commodity storage manufacturer."
Keen will also develop and manufacture "SideCar" peripherals, a sort of external hard drive for set-top boxes that will serve to add PVR capability to existing boxes.
While Kalsow said the boxes would not necessarily need to include a WD hard drive, the SideCars will be designed around the StreamMaster video streaming technology WD's drives employ.
Next year, a typical SideCar will contain about a 60-Gbyte hard drive, as users expect 24 hours of video recording capability at acceptable video quality, Kalsow said.
Pricing will not be disclosed, as the boxes will be sold directly to the set-top manufacturers themselves.
The one question in analysts' minds will be how the technology is deployed. In a Tivo or ReplayTV box, for example, a user has the ability to record analog network television content, as well as digital services, through a video codec chip.
Eliminating the codec could generate an artificial hierarchy of boxes that could only record analog content, DTC's Moore said.
Officials at Tivo, San Jose, Calif., declined comment on the Keen technology or whether the company would try to enforce its patents, other than to say, "[Tivo] has many, many patents pending. It's a valuable part of the company. That doesn't mean somebody else can't step in and do something of their own."
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varbusiness.com
Western Digital plays the same technology game that its competitors do, but its showing in our Annual Report Card survey indicates that people are just as important in building customer loyalty.
The overall winner in the storage category, Western Digital scored big in product quality and availability, technical support and ease of doing business. You can't perfect such skills in the laboratory or on the assembly line, says Rich Rutledge, vice president for Western Digital's hard drive business.
"We have a very loyal following of customers, and that comes from doing a number of things right for a large number of years," Rutledge says. "Our products are good, but even when a customer has to return a drive, we can turn it into an opportunity to make the customer even more loyal by really taking care of them. If a customer has to return a product, he can track it through the process online. In any event, he'll get a phone call conveying our personal apologies. If a company's strategy is just to hit the lowest price, this wouldn't get done," he adds.
Support has to extend to cover other devices-not necessarily Western Digital's-in the field if its solution-provider partners and customers are going to be happy, Rutledge says.
"We once had a 'quality event' at a major perfume company," he says. "When we showed up, the perfume people said, 'We bought a so-and-so computer, not a Western Digital drive.' But it was our responsibility, so we responded. You can deliver smiles or headaches-and our customers can't afford to buy headaches."
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Definition Of Criteria
Product quality/functionality: Reliability, performance, compatibility, seek-time and data-transfer rate
Technical innovation:Design, advanced engineering, and early to market with leading-edge products
Product availability: Availability of announced products, fair channel allocation policies, and adequate product supplies to meet demand
Revenue/profit potential: Pricing, points of margin, rebates, volume discounts, frequent-buyer programs, and potential for value-added services and add-on sales
Marketing/sales support: Sales training, sales leads and referrals, joint sales calls, advertising, co-op program, special promotions, spec sheets, literature, demo and eval units, trade show support, and seminar assistance
Technical support: Quality, accessibility, responsiveness, training, dedicated toll-free number for resellers, and handling of RMAs, returns and warranty claims
Administration of solution-provider program:Authorization and certification process, solution-provider feedback mechanisms, and warranty policies
Communication: Timely information about promotions, program changes and new products, and ease of obtaining information
Channel management: Distribution policies, avoiding conflict with vendor-direct sales and other reseller channels, and not undercutting the channel with online or direct pricing
E-business program: Secure partner Web site, online purchasing, online marketing/sales tools, online technical support, online presales support, and online incentives support
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The Ranks
1-Western Digital
2-Maxtor (tie)
2-Seagate (tie)
4-Fujitsu
5-Quantum
6-IBM
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