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Technology Stocks : Western Digital (WDC)

WDC 155.64

-2.7%

Dec 3 3:59 PM EST

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To: Philip Aaron Etttedgui who wrote (7578)	11/14/1997 9:41:00 AM
From: Sam	Read Replies (2) of 11057

Philip, "From what I know and from what I hear from a myriad of resellers, prices are continuing to fall week after week. Expect ruthless cost-cutting on the part of WDC management this quarter. Large-scale layoffs are around the corner. This will be true for all the dd makers." If what you say above is true, then in order for WDC to be a "$100 stock at fair value", it would have to make more than $10/share, because the market will not award a PE of more than 10x to a stock in a sector where that kind of activity is occurring. It is difficult at best to see how they could make $10/share in the environment you describe. If you are long WDC or any other DD vendor, you should be hoping that ASPs stabilize in the next 2 or 3 months, and that the price cutting does not extend beyond 2.5-3 gig drives. Otherwise we DD investors are in for a long, sad year in 1998. If a vendor with decent capacity to produce "good enough" drives wants to sell their drives at cost and not make a reasonable profit--and they are allowed to get away with it--then we are toast.

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