To all,
Enclosed is my correspondence to another once-upon-a-time owner
of WDC I met on this thread. It might shine some light on the long
term prospects of WDC. Good luck investing.
Date: Mon, 28 Apr 1997 19:57:45 -0400
To: 71473.3457@compuserve.com
Subject: Dreman book
Carey
David Dreman wrote one of the best books
Psychology and the Stock Market
out of print but find one and read it
I bot a hundred for my clients many years ago and only have one remaining
stay in touch
dave
I was looking thru my internet correspondence, and uncovered your unanswered letter.
WDC is a premier disk drive maker, with mfg facilities in Singapore, home ofc in Irvine, CA, and research and development in both sites. This co. is a survivor, 1st surviving the disk controller obselence in the early 1990s, and the consolidation of its industry in the mid 1990s. Its the baby of some SoCalers who worked in the defense industry and knew they could do it better. This spirit has stuck in the corporate culture, and is now showing up in the 2nd generation of mgmt. Kathryn Braun, SR VP, is the daughter of the founder; she has a never-say-die spirit which is great when things look bleak -- just like right now.
When they hired Haggerty as CEO he bought a visionary cheapsake philosphy of letting the suppliers 1) do the research and 2) help WDC design the new products. IMHO, WDC will be well managed, survive and remain profitable most of the time.
Now for the stock action of WDC from April 1997 until now. When I made my unpopular sell suggestion on the Silicon Investor thread, WDC was ab't a split adjusted 25. It meandered between 25-30 for Apr/May 1997, then split 2-for-1 and exploded thru the summer, eventually hitting 55. How the mighty have fallen. WDC, SEG, QNTM, the major disk drive mfg have fallen like rocks since they announced earnings shortfalls. My notes during the time were:
Sep 30, 97 - WDC down 9 to 40 after it announces it will not meet Wall St expectations of $.81 for 1q98 instead WDC will earn .63-.66. The market has truly overreacted. Did technical analysis and found 200 day m.a. was @ 35; while 50 day m.a. was pierced @ 45 on the way down.
Since then things have gotten much worst. Yesterday WDC traded around 18. WDC has lost abt 70% of its market value since its high and 33% since I sold 'too soon' in May. Here we are at a crossroads, and events are demanding disk drive mfg cut there prices to retain market share. Many say fully loaded desktop and laptop personal computers are a dying breed. Rather home users will get most of their computing power from the Internet. On the job users will get their's from 'fat servers' which supply massive reusable disk drives. MAYBE.
WDC possesses point in its favor. Its mfg costs went way down, when the Singapore $$$ was devalued in fall 1997. Instead of paying a fully trained worker singaore$5.00/hr or US$2.50/hr, now they pay the same worker the same singapore$5.00 but its now only abt US$1.25. That is a enormous cost saving.
Last time I looked, unit sales are holding steady. I have always thought its how many drives you sale that counts. Prices per Kilobyte/ per Megabyte/ per Gigabyte will always fall -- the important things is that prices per new disk drive stay in the $200 - $250 range.
There is a big application on the horizon (maybe 1999) that will required massive disk drives on home computer. That is digital video device, of 3 hr feature films of floppy disk the size of CDs. I hang with same young engineers and they demo'ed a DVD this spring and hooked it up to a TV. The sound was great (dolby), and the picture was crisp (digital). Although DVD films are compressed, they still take over 3.5 gigabytes of storage. When one of these DVD films are copied, the user needs 3.5 GB just for that one operation. Again DVD applications take off next yr, many home pc users will upgrade by buying new and larger WDC drives. This one opinion, but it from a long term holder of WDC who is going to buy it again later this year.
Stay in touch.
Carey Thompson
February 1998 |
