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Technology Stocks : Western Digital (WDC)

WDC 270.16

+7.9%

3:59 PM EST

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To: Frodo Baxter who wrote (8594)	1/30/1998 11:10:00 AM
From: William T. Katz	Read Replies (1) of 11057

The Bearish view on Conf Call: Lawrence, I agree with your bearish view on the CC. The two biggest things I drew from the CC are: 1) They are losing cash in a big way. They refused to comment on when they would dip into their expanded $250 million credit line, but as you point out, cash will continue to be used due to negative cash flow for the next two quarters at least. Haggerty sees next qtr lower than current estimates and June qtr at high-end of loss [I interpreted that to mean it was at the more negative end of loss]. 2) There are no signs of when the disk drive industry will get back to normal. Inventories are still at "7 to 8 weeks" at this time, slightly down from 8 weeks at end of Dec. That should be down to 4 to 5 weeks ideally but no time frame was given when that might be corrected. Only historical guidelines of 1 to 3 quarters. But right now, it seems only the US manufacturers are cutting back and Seagate still has 1 (or 2?) million drives hanging around? I read that Maxtor and Fujitsu say business is great and they are still building new production units!!? WDC said that most of their in-house inventory are TFI drives and the write-off included cost protection for possible decreased pricing on those lower capacity drives. The main bullish points were their targeting of a profitable line of drives to serve the sub-$1000 computer market and their continued ramp up of enterprise drives. I totally agree that WDC does not control its own destiny. They must rely on the good graces of Maxtor and Fujitsu as well as QNTM/SEG. Frankly, I'm shocked that WDC price has moved up on this conf call, but at least WDC is better-off than APM. If WDC is hurting but at least is moving quickly to MR, what about APM which is even further behind the curve and will essentially lose all but a small flow of TFI by June? -Bill

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