Marty,
The real question is, are RDRT's numbers going to look better in the next few quarters? Because of all this turmoil going on in Asia and the slump in the disk drive industry, the analysts have their eyes focused very keenly on earnings. There's probably more downside pressure on the stock than there is upside for the following reasons:
1) Read Rite is sinking money into their new facility in Fremont and yet more competition will be coming from IBM when IBM has their San Jose facility fully ramped. What are they doing to insure that they'll have more customers, retain their present customers and gain more market share, in the coming months?
2) The melt down in Asia is not a short term phenomena. At least not in Thailand or S.E. Asia. I lived in Thailand for 3 1/2 years and everything is done much slower there than here in the U.S. Their infrastructure is lousy if you asked me. The traffic is atrocious and it takes a company about 2 1/2 years to get an extra business line put in their office.
3) According to a friend of mine, who use to work at Read Rite, he says that they are at least a year and a half behind schedule, but they do have a great program going on with very dedicated people.
4) Just a crazy superstition? RDRT Fremont was built on an old "Indian Burial Site." In Indian folklore it is a grave misfortune for anyone to disrupt the burial site. Several people have told me that not one company on that site previous to RDRT was successful-certainly a weird coincidence. I don't pick stocks based on this kind of superstition, but if the superstition has any negative subconscious affect on the employers on that site, they might be unconsciously playing out a "self fullfilling prophecy."
5) The whole disk drive industry is starting to take a bad turn with Seagate stopping the construction of their plant in Ireland and laying off 1400 employees, the whole scenario doesn't seem to point toward any upward movement in stock price. If anything RDRT will slump quite a bit in the coming months until there are definite signs of a recovery in the disk drive industry.
Although I am currently short a few shares, I will probably go long once there are definite signs of a recovery in the disk drive
industry, evidence that RDRT can gain market share and maintain their current customers, several consecutive earnings increases, and signs of recovery in Asia.
Allan
Disclaimer: All the above information is either hearsay or mere speculation. |
