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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (2655)	12/5/1997 12:21:00 PM
From: Stewart Whitman	Read Replies (1) of 78576

forbes.com Yes, I do agree that Quantum is the pick of the bunch. And I'll admit that the shift to thin clients will actually be much slower than many expect (anyone buying into a thin client company can attest to that). I'm not saying that hard drives will fall off the earth - just that it has the potential to become a negative growth industry in terms of revenue/net income. The Forbes article seems to imply that Quantum is the only source of media. That's not true - Maxell, Fuji among others supply product. A little deceptive is the capacity (70 GB is probably the compressed format - 35 GB is native). In this respect, the current DLT technology is more of a medium-size backup media. Sony's AIT tape drives should compete with Quantum's DLT, and Sony's technology is more advanced in some areas. Also, Sony has published a long term plan to increase capacity. Still, the market for tape products should remain robust. I've heard estimates in excess of 30% CAGR for this type of tape drive. And Quantum is certainly well positioned. But the question remains whether a disk drive business shrinking at say 5 to 10% a year, can be overcome by a tape drive business expanding at 30% a year. Don't get me wrong, there's a price at which Quantum would be attractive to me, and it's not too far below the current price. I just see a lot of uncertainty, and think that the mutiple at which I would sell would be lower. Stew

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