Joe,
The Seagate mainstream desktop division is run by an ex-Conner guy.
I seriously doubt that this is relevant because Conner was virtually integrated just like WDC. Now that Conner is part of SEG, it has to source its heads from SEG's head manufacturing division, which is in the process of converting to MR. In other words, the Conner assembly operation is not the one dictating the pace of technology introduction on the desktop.
It takes a technology AND market savvy leader to do a good job at picking the right point to roll in new technologies.
This is an excellent point to use to put this issue of areal density leadership in the proper context. Up to this point, the people cheerleading the ostensible winners of the density race on the desktop have totally divorced that issue from the bottomline.
First, IBM is the one with the serious lead in areal density that really matters. The Travelstar 4GT uses MR heads with areal density of 2.64 GBits/in2. I don't know exactly how disk drive engineers convert that to the more understandable Gbytes/platter, but that should be close to something like 3.1 GBytes/3.5" platter. Nobody else is even close.
Second, let's take a look at the 2.1 GB/platter crowd and see just how solid that lead is.
As far as I can tell, QNTM sources its 2.1 GB MR heads from the following:
1) RDRT - 1.6 GB MR heads
2) TDK
3) Joint venture with MKE - this operation is still losing money and is not even expected to show a profit until the March 98 quarter at the earliest. This is providing something like 20-25% of QNTM's head requirements.
I seriously doubt that QNTM's blended head cost at this point is low enough for them to turn whatever areal density lead they have into a serious competitive advantage. Heck, they only made less than $50 million in profits on $1.2 billion in disk drive revenues in the June quarter.
WDC is using RDRT as a primary supplier with IBM and TDK as swing suppliers. It is supposed to start shipping its line of drives with the 2.1 GB MR heads this month, but the recently released 10K revealed that WDC contemplates achieving areal density leadership on the desktop in early 1998. This after crowing that they will get the areal density lead on the desktop when their drives start shipping this month. Go figure.
Anyway, let's look at RDRT's recent track record as a head supplier. RDRT was late to market with its last 3 TFI programs. It abandoned its last 2 TFI programs (1.7/2.1 GB). It's 1.6 GB MR program is thriving with 5 or 6 customers and its 2.1 GB MR program is picking up steam with 3 customers, including WDC. It remains to be seen if RDRT can continue rebuilding its track record with the 2.1 GB MR heads and at what cost to itself and/or to its customers.
Tell me again, just how solid is that density lead on the desktop?
Areal density is an important issue, but the bottomline is the bottomline. What practical use is it if a drive maker has bragging rights regarding areal density leadership on the desktop when it can't even translate that into a serious cost advantage or significant profits? QNTM is a clear example of this. WDC may turn out to be another one.
And its not exactly like SEG is standing still, totally oblivious to the obvious practical benefits that the density lead on the desktop provides. So far, they have disclosed their road map which includes the 1.8, 2.1, and the 4.0. Like I've said before, the 10/14 conference call is going to reveal more about SEG's progress, or lack thereof.
I still maintain that its status as the lowest cost producer allows them to remain competitive. I don't think it is a trivial matter to capture the disk drive slot of a $299 device like WebPlus TV.
Regards,
Gus |
