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Technology Stocks : QUANTUM
QNTM 9.940-0.5%3:59 PM EST
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To: William T. Katz who wrote (5969)12/3/1997 2:27:00 AM
From: Raffi  Read Replies (3) of 9124
 
William, although most of what you say makes sense for the long term (1-2 years), I think the DD sector got to far ahead of itself with the unecessary introduction of new technology. Maybe they were forced into this situation by the far east companies. The DD sector currently doesn't have high margin products. The majority of workstations and file servers can get by with a couple of 4-7 GB drives which are selling at discounted prices. Most home and SOHO systems can get by for the next year or so with 2-4 GB drives selling at massive discounts. Where are these companies going to make their money? General business practice: You don't introduce faster bigger better technology just because you can. It has to be introduced at a time when their added benefits are needed and when their higher cost is justified. If the DD companies had not introduced the higher capacity drives so early, 1)They would now be selling the mainstream drives at higher margins and 2)They would have had future sales since 6 months from now, the 10 GB drives would be more reasonable to spend the extra cash on. Another example is the DRAM industry. By dropping prices on high capacity DRAMs they did maintain reasonable margins for the time being but screwed their earnings for the next 6 months to a year because most people only need 32 Megs which may be obtained at a great discount.

You may say that the availablity of the technology will help demanding applications to be developed faster, but this doesn't happen overnight.

The above is worth around $0.02.

Raffi
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