Don Earl-
My main reasoning for shorting APM is their current
customer mix(or lack of it). Unfortunately, APM does
not publish much info even in their 10Qs and 10Ks
so I cannot get Q by Q #s. They also don't hold CCs
which is a real pain for the avg Joe. Anyway, from the
From the 10Ks(FY ended SepQ) major customers listed:
1995 1996
WDC <10 44
NEC 20
SEG 41 13
QNTM 10
Maxtor 19
(The 97 10K has not been filed, but I would bet you see
WDC as a MAJOR player. If they don't mention %s then
they are hiding it.)
WDC was mentioned in 95, but the % was not given,
typically this means <10%(I put that in, might be wrong)
For the current year/Q who knows,but from what I have
heard, a MAJOR(almost 90%) part of the current rev is from WDC.
The QNTM rev has dried up - they are essentially 100%MR.
They only have one small pgm with Maxtor now.
They had a small pgm with Micropolis which is now dead.
You can see the acceleration to WDC rev from 95 to 96;
that is when WDC remained TFI and wanted undershoot
reduction which APM supplied. APM gained a tremendous
amount of WDC share from RDRT. But now the TFI products
are quickly ramping down, or being dissolved alltogether.
- Take a look at the most recent WDC PR:{My notes are in Italics}
ofurther reduce production of desktop hard drives from previously
announced levels{I would assume this means reduce the older products}
ofurther accelerate its transition to desktop and enterprise hard drives
featuring magneto-resistive head technology{Good for RDRT, bad for APM}
oexit the 3-inch portable hard drive business and re-deploy resources
into its leadership desktop storage business and the expanding opportunity
in its enterprise storage business;{The portfolio was an APM pgm}
{During the COMDEX CC of 17nov97 WDC said:}
(7 of 10 manus have now designed in the 3" slot. In the past we have
been trying to win slot acceptance rather than orders. But we did
get an order this week. Should see a significant increase here.)
{They've exited that biz now. I am sure APM expected to start shipping these heads in the next year
Now it has dried up}
oplan to take one-time charges in the second quarter totaling in the range of $85-$95 million.
Western Digital indicated that the yields, production ramp,
and customer acceptance of its new desktop and enterprise
hard drives featuring MR heads were progressing extremely well.
Based on the Company's revised build plans, its production
of hard drives with MR heads will exceed 75% of total drives shipped
as the Company exits the June, 1998 quarter.{This to me confirms
that they are happy with the new MR 2.1GB(Tuscon) drives. IMO
they are saying that they are going to reduce production of the
older TFI DDs, therefore increasing the % of MR DDs produced.
In the 07Nov97 CC, MarQ was going to be "almost 75% -
Accelerated by 1 1/2Qs", in the 17nov97 CC it was "still 75%"
and now it will "exceed 75%". The first "acceleration by 1 1/2Qs"
hurt APM in later 98 IMO. The latest "reduction in production"
and cancelation of the 3" pgm hurts them in the next
few Qs (early 98). IMO APM is going to be hurt significantly
all through 1998 now. All of these changes have been made
since the last time we heard from APM}
- Take a look at the SepQ97 APM earnings PR:
{They still expected that there was "value" in the 1.7GB TFI heads.
AND they expected to ship volume production thru Fiscal 98(Sep98).
They guided analalysts lower thinking that they would sell these
products to WDC. That has all changed...}
If WDC is in fact that big of a customer then APM is in trouble.
WDC is basically ramping down the older products as fast as they
can. Look at the projected one-time charges.. APM has NOT
produced MR in volume. The rev from MR has been
$7.1, $4.6, $7.2 million during the last few Qs. Making 500k
MR heads for the Q is NOT volume production RDRT produced
7mil last Q and expect to make around 15mil this Q. But this
is almost a mute point. MR HSAs is the focus now. And APM
hasn't even started that - not when RDRT expects to produce 2mil
this Q. It is a VERY difficult transition.
WDC was caught out with TFI. Even they admitted in the COMDEX
CC that they may have stretched it 1Q too many. They have been
talking up RDRT lately because of the job they have done to help
with the accel'd transition. APM is also caught out as a result.
You don't wave the magic wand and say
"I'll produce MR now" and forget this leap-frogging to GMR
BS. That won't happen either.
Out of the 4 available 2.1GB products(WDC, Maxtor, Samsung,
QNTM) RDRT is qual'd as a major supplier in all but QNTM.
And they are talking to SEG again. The next gen MR(2.8)
will be announced early next year, but will not ship in
volume probably until mid to late 98. What is APM going to
do until then? 2.1GB will dominate next year.
My price Target? I've given up trying that in this sector.
My best guess is lower, and ask me again tomorrow.
todd |
