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Technology Stocks : Disk Drive Sector Discussion Forum
WDC 139.09-0.8%Nov 21 9:30 AM EST
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To: Sam who wrote (1286)10/22/1997 12:34:00 PM
From: roger held  Read Replies (1) of 9256
 
Wow! This is great. Finally some substantive discussions on these threads. I'm really happy to hear that QNTM is having problems on the high end, because it proves the problem is industry wide. I have a couple of speculations on the situation.

1. The disconnect between the box makers and the drive makers may be that the drive makers planned their business around the forecast/orders from the box makers and needed all of those orders to make a profit (as planned). However, due to the allocation situation the box makers over ordered (last Spring) and are now working off their own inventory of drives (i.e. inventory problem is not at the drive makers but at the customer locations). Thus the box makers can make money and ship units without buying any new drives. Also, I have heard that the box makers are holding their breath for the next generation products so there may be some pent up demand.

2. The other point is that IBM may be taking market share from QNTM as well as SEG since they announced pretty good results in their high end business and their market share has benefitted the most from SEG's decline. Also, the high end industry drop off would not affect WDC so much since their market share is the lowest among the major drive companies (<4%).

I was very much surprised by the quarterly results from SEG (as were many SEG insiders, too). I wouldn't expect much better communication with analysts when the insiders don't know either.

Regards,
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