Mark,
Margins and pricing pressures are definitely huge problems. They indicated during the call that they wouldn't ship more drives if they can't make money on them. Shipping 10 million drives at 0 profit doesn't do much good.
I don't know how much more down side there is (does anyone?). We broke through very strong support at 26-27. On Monday, 11/16 at Comdex they will hold a Q&A with analysts and will talk about revised EPS. Big EPS revisions downward could move the price lower. I think we have to worry about the general market and the other DD makers. If WDC is having problems, how bad off is SEG, and how much will QNTM be hurt? In addition, WDC suppliers will get hit because they will have to lower their prices (APM, RDRT, HTCH, etc.). We could be in for a bunch of warnings.
Short term, things look very iffy because of pricing pressures, margins, competition, market conditions, etc. Long term, WDC still looks very good (JMHO). The next generation drives are coming out around March 98, demand is very strong, PC growth is still 20% a year, new OEMs are being qualified, the company has an excellent balance sheet, MR transition is going well and being accelerated, etc. Hopefully this thing will turn around before I get more margin calls. |
