Duke, here's the story of APM (shortened)
APM and WDC made decision a while back to extend the economic life of TFI technology while everyone else switched to MR ASAP. This worked like a charm for 3 quarters as they turned in the earnings that would have caused a buy at 33, APM's run to 60 last fall being the wise analysts' extrapolation of the brand-new earnings machine into the year 1999. In a previous technology transition, to TFI I believe, APM made the switch as soon as it could and got bogged down to near bancruptcy, so this time it was going to milk the older technology and extend it from 1.3 gig to 1.7 gig heads while gradually developing the expertise in the new (MR). Last fall there was a shortage of heads altogether, I suppose because the MR production wouldn't meet demand.
Now the sector has been tanking since Seagate first warned last summer. Production problems and competition and "slowing demand".
SEG was totally MR and at its earnings report/cc commented that there were plenty of MR heads, TFI wasn't so available. WDC and APM were milking the TFI (1.3g) cow and came in with earnings well over previous estimates. APM had a delay in full production of 1.7g heads.
Now then WDC warns the earnings wouldn't be so hot OK pricing etc. Then APM came in well under earnings - stock gets beat to 25 best hope is, ok they didn't sell so much so what. Then WDC comes in with earnings near 0.20 not the warned-of 0.6 from 0.8 (fujitsu dumping)
and had problems and so throws in the towel on TFI-1.7, APM is left at the altar and Barron's article dumps on it.
That is past, justifies 22 again but no major support levels below that. Now the problem is future, how does APM execute in near term and intermediate in getting MR heads produced. If it can fare well there I'd guess 25 is our price for PE of 12. However who can see into the future in such a secretive company in a secretive industry. Without WDC to buy TFI-1.7 (presumably APM can make them ok, problem lay more in the integration), Seagate and Quantum already all MR...
I'm rather new to the industry/stock myself so anybody feel free to expand on the story. APM now has a monopoly on the TFI-1.7g it might as well be a monopoly on 5 1/4 floppy drives.
Greg |
