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Technology Stocks : Western Digital (WDC)

WDC 221.51

-0.3%

Jan 16 9:30 AM EST

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To: Sarmad Y. Hermiz who wrote (10674)	7/25/2003 11:47:30 PM
From: Sarmad Y. Hermiz	Read Replies (4) of 11057

Regarding what wdc can gain from readrite assets. If wdc plans to make 50% of its head assemblies, that will be approx 60 m units. Matt refused to directly say the mix of single platter/multi platter. But I'll assume 3 heads per drive. For 40 m drives annually, that's 120 m heads. 50% of that is 60 m heads. Which is exactly the capacity of the Thai plant. Perfect. What is not perfect is the capacity of the Fremont fab. In 2001, RR sold 110m head assemblies. That's significantly more than WDC needs from its internal facility. And I think this is where the hostility of the analysts came from. WDC management did not give any hint of what they would do with the extra capacity. Can they actually sell to Maxtor and Seagate, who currently buy nothing from RR ? Would they sell to Samsung, whose main function in life is to sell disk drives at a loss to get into the market ? If Matt had said they'll shut down half the plant and scrap the old machines, today's sell-off would not have occurred. Instead he said he'd love to sell heads to his competitors. He said that right after he said that he will reduce R&D by focusing only on WDC designs. I guess he was tired after he stayed up all night bidding and counter bidding. It was exactly this lapse that forced the conclusion that WDC doesn't yet have a plan of what to do with their new stuff. Worse, it gave rise to fears that he will get into the merchant head business that drove RR into bankruptcy. I, however, am sure Matt will come to his senses as soon as he gets some rest. A year ago he terminated all WDC ventures that were losing money. I think he will not hesitate to close down the merchant head venture if it doesn't turn a profit immediately. Part three will be coming soon. Sarmad

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