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Technology Stocks : SYQUEST
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To: Dale Stempson who wrote (5209)1/10/1998 4:50:00 PM
From: Joon Song  Read Replies (1) of 7685
 
>>>>
Joon, I'm certain their margins are severly impacted by low volume coupled with ramp-up costs. I agree they're probably making good margins on the disks and are hurting badly on the drives. This should significantly change when volume manufacturing is achieved. The questions still remain however: Will Syquest get the demand it needs to become profitable? and What volume levels are needed to turn a profit?

Regards - Dale
<<<<

I'm sure you could account for ramp-up costs in the earlier quarters of 1997, but even during the final quarter of fiscal 1997 when they weren't ramping any new products (at least none that would appear in cost of goods sold), they still had overall gross margin close to zero. If the margins on their drives are so bad that they almost completely negate the margins on the disks, then no amount of volume increase is going to bring their drive business into profitability.

Ask yourself this question: Do you think given Jaz level volume that SyQuest can manufacture drives for so much less than Iomega that they can sell drives (SyJet/SparQ) at $100-$200 less than Iomega and still make a profit?

I say no, and that only indicates to me that SyQuest must be losing a ridculous amount of money on the drives they are selling now at the current production volumes.

Joon
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