Having slept on it, the market is just being
irrational.
At first, I wanted to say "How stupid everyone
is that didn't expect this shortfall - and how stupid the analysts are for downgrading now."
Then I realized "How stupid I am for
not waiting until the sheep (read:
analysts) downgraded before I bought in."
You know, most of us here had it right -
we knew this was coming but felt it was
already priced into that 42 ->23 fall.
Turns out the analysts and institutions
are sincerely surprised! My bank account
is poorer, but I feel like my relative
investment IQ to these people just jumped.
Now I'm saying "How stupid I would be
to sell now." Quantum is not WDC+DLT.
They have a 6 month jump on MR componentry
that WDC can't even get its hands on.
I was in on the call, and it is obvious that
the DLT 7000 is very hot, with no competition
for 12 months - management was emphatic
about that. The flat sequential revenues are
due to lower media revenues (since the
DLT holds twice as much on the same tape)
and a drop off in 2 and 4000 sales that
offset the 7000 as production was ramping
up and struggling to meet demand. Now
management says the 7000 is fully ramped.
This means that DLT will once again
regain its growth story. I can't believe
Kim Alexis saying she's surprised DLT
growth won't continue at a 100%/year
clip. What planet is she from. Trust me,
the analysts in on the call are not that
bright - their questions often revealed
that they had only the faintest idea of what
was going on - questions like, "How
much does the 7000 tape hold?" and "How
many tapes do the DLT drives ship with?" The only guy that impressed me was the Bear Stearns
guy - and he's the only one that still sees the
stock worth 40.
Management sees the industry consolidating
down to the current top 4 suppliers plus
maybe 2 survivers from the current
second-tier 15. This will lenthen the cyclicality
and is good for the industry. Management
practically bragged that the top 4 hold 80%
of the market so how could these other 15
even find it worthwhile to continue to invest
in the industry. Don't tell Janet Reno.
Quantum is in the best position of the DD's, with
DLT providing the cash flows to keep the
company profitable during the cyclical downturn.
This is an opportunity for Quantum to break
from the pack. Neither Seagate nor WDC can
even remain profitable. Seagate has that
cash cushion as an ally, admittedly.
Things may get worse before they get better
but predicting this stock short-term is going
to be a crap-shoot with all the people watching
it. Long-term I don't see a change in the
fundamentals on which I bought. Comments?
Good Investing,
Michael Burry |
