My thought on the write-off of old technologies: This may be WDC's strategy to persuade its suppliers to absorb the price erosion. per the replay of the conf call, the price erosion has been 2 to 3% more than unsual for the quarter. If additional 2% erosion is coming for the quarter, then a total of 5% needs to be made up by cost cutting. Assume ASP of $180, 5% of this is $9. "Hey, my dear supplier XXX, pitch in your effort, otherwise, I'll discontinue this drive program and you are out until the next opportunity." Maybe, this is what WDC is contemplating. And, it may work because most suppliers would rather keep factories running while making less money or breaking even instead of letting the factories sit idle. Therefore, write-off may not happen if majority of suppliers pitch in to help.
And, if this happens, the quarter may not turn out as bad. The above is just MY WISHFUL THINKING. But, it can be a very good strategy to get some suppliers like RDRT and APM into lean and mean shape.
John |
