Mark,
Well, my tone is depressed, but, perhaps foolishly, but I still think that there is good money to be made in some of these stocks. Yeah, drives are out of favor. And I will be proven wrong if it is true that Fujitsu, Maxtor, IBM, Samsung all want to be among the top three in this business in the next two years--obviously something's gotta give if that be the case, one of them being any profits that anyone who is in this business might envision. I just can't see that happening, although I may be wrong. Can the Koreans maintain the level of investment that will be necessary? Indeed, can even Fujitsu, with the Japanese govt in a continual state of denial about the severity of their liquidity problems (according to someone on the Asian thread, they are allowing their banks to count their stock holdings at purchase price rather than mark to market. Cute. Soon they'll be lending sea shells and will be indignant when no one takes them.) Fujitsu has a lot irons in the fire; can they maintain them all? Yeah, they are huge, but all of their business require steady, large infusions of cash and attention.
You say, "The notion that 'things have changed' and PE's deserve to go higher because business practice are more stable was just a bunch of baloney." Well, perhaps it was overstated, but frankly, it is different than it was, say, even five years ago. There have been at times 50, 60, 70 or more companies vying for market share. Now there seem to be about 7 or so companies vying for serious market share and few other fringe players trying to survive. That in itself makes a difference, even if there obviously still are and will be again times when supply and demand get out of balance. And there will also be times when they will get back in balance.
You also asked, "Do you think Quantum will be able to build their retail presence and regain some OEM market share?" I know people are depressed about QNTM diving so far from its highs (believe me, I know, I am too!), but they sold over 7 million drives last quarter. Doesn't sound to me like they lost market share. They lost profit because of diving ASPs, not because they lost market share. And that is the real question: will ASPs stabilize, and return a more "normal" level of deflation. It feels to me like they have stabilized a little in the past month, but I don't really know for sure.
Best wishes,
Sam |
