To all. I talked today to someone in Quantum's IR department - Phew! What a relief! The high confidence level that, although pricing is very agressive on the low-end desktop segment, Quantum is not being impacted nearly as much as the competitors. Quantum has a "richer mix and higher capacity" DDs than the competitors. "We also have the lowest cost per MB and are 100% through the transition to MR heads".
I suggested that WDC and SEG are about three to 6 months behind in the transition of their production lines and inventory adjustments to needed to move to MR head DDs. The spokesperson said that Quantum thinks that they are farther ahead than that. Because of their being behind, WDC and SEG are saddled with higher cost manufacturing of obsolete DDs just at the time that the market is ready for increased performance and higher capacities.
Quantum sees demand across the board and particularly from their "large OEM customers" (I guess CPQ, DELL), as being "realy strong . . . great demand." I asked about the impact of the Asian "crisis" on business levels and the response is that they are not certain yet but see no significant impact at this point. Some aspects of the situation are positive while others are negative. While some demand from Asian consumers may be reduced, that segment of the world accounts for relatively a small portion of end uses, and the lower cost of supply due to the devaluation is having a stimulating effect on demand of PCs and other use equipment throughout the rest of the world.
New qualifications of Quantums' new drives at OEMs is going "extremely well" - in other words, Quantum is kicking the s**t out of WDC, SEG, etc. in the large OEM accounts at a time when these accounts are capturing an increasing share of the overal PC/workstation/server martket.
We also talked a bit about Terra Store but since it will be toward the end of next year before sales are likely to become significant, I talked mostly about the "gee wiz" aspects of the technology and where it is likely to fit.
Boy are there going to be some foolish looking fund managers and other investors in just a few weeks! Come January/Feb., check out their prospectus and have a good laugh on whoever hires these idiots.
My summation is that there will be some impact on Quantum's earnings this quarter but the impact will be mitigated by strong unit growth in both the DD and DLT product areas with help from some additional belt tightening cost efficiencies.
Quantum said that they have not revised their guidance for the quarter since the last conference call. Naturally they expressed some caution but said that things are pretty much in line with what they have expected and they have no plans to restate their guidance or issue earnings warnings. It is still too early in the quarter to see how the final numbers will roll in, but it appears the market fears have been extremely overdone.
My understanding and assumptions about Quantum wre completely suported by what I discussed in the call. To be honest, I half expected some disappointment - a drop like this shakes even the firmest reasoning. IMO, hold tight, don't fret, stay totally invested with Quantum being a significant stake in your portfolios. |
