Howard, I'd really doubt WDC would go to $7 or $8. It would be amazing! They would basically have to say that they have no hope of becoming profitable until the year 2000, plus the market would have to crash.
Here's my humble opinion:
WDC is being beat down because of fears of a price war. At this point, there is one company dumping, which forces them all to respond. The big question now is whether this is just an anomoly or whether it will continue for several quarters. The answer depends on the exact cause, which is very hard to determine. If Fujitsu has decided to go on the offensive and gain market share, my guess is that this will be short lived. If this is a problem with oversupply, then things could get worse before they get better.
I'm trying to picture the worst it could get. I can't imagine WDC taking a loss. If the Japs are selling at cost, yet WDC is still turning a profit, then things are still OK. But I wasn't around for the last price war.
My guess is that this won't be too bad. It will be the real test of whether the oligopoly will work. This is an example of why I never thought it would hold up. There are just too many foreign companies not committed to profit. Probably right now people are selling under the fear that things will be just like last time. I can't say that it won't be, but think that the consolidation that occurred after the last price war should prevent things from deteriorating too bad.
At best, we can hope for a positive outlook from COMDEX on Monday. WDC will know a lot more by then regarding the extent of the pricing pressures. Any serious talk will have to wait until then, because right now we are all just guessing.
Brian |
