I just heard the WDC conference call. Since WDC is APMs sole customer I thought I would recall some of the info that came out of that call, particularly as it relates to APM.
The increase in the special charge since Dec 2 is primarly due to cancelation charges associted with additional thin film cutbacks. Part of the charge is set aside for Q3 and Q4.
In house inventory(in dollar basis) is currenty more TFI then MR. About 8 weeks worth. Normal is 4-5 weeks.
The transition schedule to MR is as follows:
DEC 20%
Mar 40%
Jun >80% (emphasis on the greater)
Said they did not expect any problems getting componets.
Last QTR was not the end of oversupply in industry. Current Qtr still showing oversupply. They gave absolutely no indications of when things will ballance. Only said that historically it takes 1-3 Qtrs.
They recognized that SEG and QNTM are also taking proper steps to reduce production. When asked about Maxtor and Fujitsu they said suggested someone should ask Maxtor and Fujitsu.
My read: It was clear from their comments that there is no way to know in advance when this oversupply will end. We will only know when it occurs.
ASPs have come down drastically in this enviroment and are not expected to return to previous levels, although they are expected to recover to a degree.
Current drives for sub-1000 pc are supplied by excess inventory in the market. Not making profit on drives supplied to this segment. They have plans to begin a new drive line that will be profitable in this segment once things get back to normal and the excess drives run out. Rufused on several occasions to talk about time lines or margins on this program.
Margins on a per platter basis are the 1.3, then 2.1, then 2.8 in increasing order.
The End
Its unclear to me if the forward looking statement in the APM earnings release took into account WDCs most recent acceleration from TFI. That is, any more recent then the WDC Dec 2 release, and the Dec 8 APM recognition of that release. One thing I know for sure is that there was nothing in the call that would be bullish for APM.
For WDC holders, if your reading this, there was nothing bullish for you either. Thats the honest truth. There is no end in sight. That said, thanks to WDCs creative accounting to show a profit, I expect WDC to go up tomorrow. I am not, and have not, been short WDC. But I will short into strength if it gets out of hand.
Jon Bird |
