Komag problems are result of industry trend.
Komag has been hiring like crazy here over the last year, and so a lay-off of 350 is no big deal. I bought some Komag earlier this summer, and turned around and sold about two weeks later. My research uncovered a very disquieting trend among its customers. Seagate, and Quantum have built and are building their own media plants to make the platters that go into the hard drives. Seagate originally said they were going to supply 70% in-house and now expect that number to exceed 85% or better. Komag is being relegated to a marginal supplier. Quantum is also getting platters through a joint venture with the Japanese, I believe. I wouldn't consider Komag a bell-weather for the HDD sector anymore.
I think SFLX is well-positioned, but the current quarter will be another disappointing quarter given the problems at Seagate. I consider this one last chance to get on board.
Given what I believe will happen next year, your projection of 30+ for this stock is in line with my projections. I honestly believe the analysts now are on the low side of earnings for next year. This company could put numbers like 30+40+40+45= $1.55 on the table easily next year. The risk /reward ratio looks great for this stock.
OFF-TOPIC: The key to analyzing Intel, was to recognize Moore's 2nd law. The First law said the number of transistors double every 18 months. The 2nd law says the capital investment required to develop, design, and make a new generation microprocessor is twice the investment required for the previous generation. The 386 cost $1B to deploy, the 486 about $2.5B, the Pentium/K5 about $5B, the PII/K6 about $10B, the 7th generation will cost over $20B, and this too much money for even Intel to afford on one processor design. This is why they have partnered up with HP to develop the Merced. I quickly realized that only Intel had the system to design and the money to build the MPUs that were needed to control the market. Even if they don't have the best technology, they still will control the market share. I bought Intel warrants and AMD about 4 to 1, about 18-24 months ago, and have enjoyed the ride. Lately I have been selling Intel, because for the first time I believe it is selling for more than the S&P multiple. But it still remains 20% of my portfolio (now all profits). AMD is about 8%.
Paul |
