Disk Drive Sector Discussion Forum Message Board

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Technology Stocks : Disk Drive Sector Discussion Forum

WDC 163.00

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Nov 7 9:30 AM EST

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To: rich evans who wrote (8883)	10/29/2000 1:41:10 PM
From: Mark Madden	Read Replies (1) of 9256

Here is a weekend report on disk drive pricing from a sample of retail distributor drives. The drives include 347 samples from 5 different distributors. The average sample of desktop disk drive remained stable last week. Current quarter weekly average price change (weekly rate): Weighted desktop --- even 0.0% Less than 11gb --- even 0.0% 11gb to 21gb --- up 0.2% Greater than 21gb --- down 0.2% Enterprise --- up 0.5% Current Quarter price change (monthly rate): Weighted desktop --- down 1.5 Less than 11gb --- up 0.6 11gb to 21gb --- down 0.1 Greater than 21gb --- down 3.4 Enterprise --- down 0.3 3rd Quarter price change (monthly rate): Weighted desktop --- down 1.9 Less than 11gb --- down 1.3 11gb to 21gb --- down 1.7 Greater than 21gb --- down 2.3 Enterprise --- down 2.9 2nd Calendar Quarter price change (monthly rate): Weighted desktop --- down 3.0% Less than 11gb --- down 3.7% 11gb to 21gb --- down 2.8% Greater than 21gb --- down 2.6% Enterprise --- down 1.7% 1st Calendar Quarter price change (monthly rate): Weighted desktop --- down 1.5% Less than 11gb --- down 1.1% 11gb to 21gb --- down 1.3% Greater than 21gb --- down 2.2% Enterprise --- up 0.1% The conference calls validated the pricing report results last quarter. However, the pricing reports were misleading to earnings expectations. The 3rd Q price reductions were similar to the 1st Q reductions but the earnings fell far short. This is because the 1st Q prices started after a good quarter with the prices high and profitable. The 3rd Q prices started low and unprofitable after a poor quarter. Both quarters held the status quo. The current quarter has begun on the higher side. The pricing reports measure the price reductions in individual drives. This is different the average selling price (ASP) of drives that takes into account that people are buying larger and faster drives. This change in mix also has a large impact on profits. The ASP of drives had large changes last quarter among the different drive companies. The drive ASP raised slightly among the big four but SEG had a large increase in ASP while MXTR and HDD had large decreases in ASP. This may be because SEG has been lagging in production of the higher capacity drives but they may have caught up. If they took their bite back out of the high capacity drives they left a less favorable mix for others. Another negative for earnings may be the cost reductions. Cost reductions have been the saving factor for drive companies while the pricing was deteriorating. Cost reductions have been large while increased areal densities have allowed fewer components in the main stream drives. However, these cost reductions may be harder to come by. The mainstream drives are mostly single platter drives that can not reduce many components. The costs can no longer support the price reductions of the past. The 100% annual areal density increases are growing faster than computer capacity demand but increases are opening new markets. The markets for set top boxes and server applications are promising a need for higher capacities where higher areal densities will still reduce costs. These markets are not a large factor today the their fast growth will change the disk drive seen in the near future. Regards, Mark

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