Greg, something is troubling me. Perhaps you or someone else can clear it up.
I have been thinking about the WDC press release regarding Fujitsu's dumping of drives severely affecting WDC's bottom line this quarter. It just doesn't hold up when I examine it. Here is how I see what has happened:
WDC, a company with excellent management, has carefully analyzed market conditions, sales prices, supplier costs, etc, and has decided this is the best time to transition to MR technology. They have put it off for two reasons:
1. Allowing other drive makers do the transition first means more information and experienced employees are available to WDC, reducing risk.
2. TFI is cheaper to produce than MR, which allowing higher margins.
Quantum and Seagate have already converted, leaving a glut of TFI media and assemblies on the market by suppliers such as RDRT, APM, KMAG, and HMTT. This was verified in the reasoning for recent downgrades of these companies.
Now here comes Fujitsu, a company with about 5% market share. Theye start "dumping at cost" to increase their market share. WDC's response? Expedite the transition to the more expensive MR technology while cutting prices to compete with Fujitsu.
Doesn't this sound strange to you? It does to me given Haggerty's repeated statement about how the industry has "matured". Why doesn't WDC take advantage of their equipment and the glut in media/heads by mass producing cheap drives and dumping them in Fujitsu's markets. Fujitsu can't whine to the government because WDC is merely competing.
If Fujitsu sees that their dunping actually has the effect of reducing their market share, perhaps their managers will begin to act a bit more intelligently (assuming they still have their jobs).
There is probably more to it than this. Your thoughts appreciated!
Ken |
