Good post, coupla quibbles:
1. QNTM has made huge hi-end investments and never made money: it may be too early to tell, maybe not. I'm willing to give it another year.
2. DLT was no accident -- they knew what they were buying. The accident was in what bad shape they got it and how long it took to turn around to major profitability. They STILL haven't branded it well or made it a "franchise" because while the tech is well respected, it has no QNTM name identification assoc. w/it.
3. Agreee completely.
4. Tough call, but I disagree. MR transition for WD will show up in 1998. It has shown up in their stock already. The MR transition is fueling the sell-off every bit as much as the hi-end problems.
5. As a QNTM bull, I'm not bying the bull**** about DLT=$250 shr (or fill in your own #). Fact is, few stocks ever trade at FMV, and aren't supposed to -- there has to be a discount for risk. Today there is risk everywhere -- including DLT, tho less so than elsewhere. If SEG is successful, if Sony is successful in tape, if DLT sales slow -- even slightly -- QNTM will show its DLT risk. That's why they are working hard to downplay DLT growth expect. for next year. No one wants to be dependent solely on a single product, business unit, or segment for their #s. One of QNTM's greatest strengths right now, ironicaly, has been their failure to establish a solid channel. When times turn bad, the channel demands that you dump inventory quickly. It stacks up there more quickly, and you must look out for hundreds of small or medium-sized partners. In OEM, espec. with JIT invent., there is less exposure to inventory -- QNTM was not concerned about Xmas because they knew that OEMs would need the drives immdiately and had thin inventory levels on their side. That assumption, of course could turn sour, but there is not nearly the risk as there is with channel panic -- "got to move a ton of drives quickly now, help me by cutting prices so I can afford to do so."
I don't want to get into the CEO vision debate except to say that all three of these conmpanies are legitimate competitors, and don't kid yourself (golfer9). If you think QNTM and WD don't take shugart very sreiously and fear him daily, or that the same thing is tru around the table, you are flat out dreaming. Who will win or gain mkt share/stock value is anyone's guess. My guess is that QNTM has chosen wisely in its industry segments, in many of its financial and operational decisions, and has room to move into new areas like optical, portable and consumer. These are all going to be key areas. And all will requires some expertise in Desktop, Tape/Removable, Portable, High capacity. |
