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Technology Stocks : Western Digital (WDC)

WDC 269.39

-7.2%

3:59 PM EST

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To: Jeff Mills who wrote (7188)	11/7/1997 9:06:00 AM
From: Frodo Baxter	Read Replies (1) of 11057

Whoops! Guess we get another reminder that a tech stock with a low PE is the kiss of death. "Additionally, the company is considering taking potential non-recurring charges in the range of $15 million to $30 million. The actions being contemplated are associated with the company's phase-out of thin-film head products in favor of hard drives featuring newer magneto-resistive heads." Looks like their depreciation schedule for their drives were, umm, overly optimistic. I guarantee this charge will be taken. The stock market is earnings-crazed. One way companies meet lofty expectations is to cook the books: stretch depreciation out, show better earnings for a while and then take out a "one-time charge" when end-of-life occurs earlier than concocted. This is one reason why P-E is just at the high end of the historical band but P-B is waaaay high and unprecedented. p.s. How does WDC's cash position look now? In 20/20 hindsight, their stock buyback program was another bad spawn of the bull market.

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