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Technology Stocks : QUANTUM
QNTM 9.940-0.6%Dec 5 9:30 AM EST
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To: Stitch who wrote (7389)2/22/1998 11:50:00 AM
From: T Bowl  Read Replies (2) of 9124
 
I thought we all decided a while ago that you needed a mix of vert
integ and a small outside supply? Just enough in house capacity to
take advantage of the potential operating margin gains in the good
times, and a small outside supply to keep your finger on the pulse of
what the market is up to on the technology side.

At least that's the official line on outsourcing, but I think we all know that
the biggest advantage of having an independent supplier is so you
really stick it to them in he bad times.

I think SEG has kindof proved that the technique has worked
well with the success of their media ops, and complete flop of
the heads side.

It's obvious to me anyway that the hurt KMAG and STMD are in right
now is partly a result of being cutoff from the SEG trough. Look at
the #s: DecQ96 SEG rev for STMD and KMAG was $100mil.
DecQ97 rev was $10mil. Imagine that capacity being idle at SEG right now!
From $100mil downto $10mil in a year! (For the Quarter!)

SEG played the heads game to the extreme and lost. They tried to
do it all themselves and really put themselves in a jam.
In the DecQ97 CC Pat Bonney said that the head technology has
"to a degree delayed the introduction of the 3rd and 4th gen MR products"
I believe he was referencing the 1.6 and 2.1GB MR products that have cost
SEG plenty to date and will cost them even more during the next few Qs.
This is why SEG is so desperately trying to establish a good working
relationship with RDRT. I'm convinced the way to be successful
in life is to surround yourself with the best people. You simply can't
do it alone - that's why these threads are so valuable IMO.
Stick your head in the sand and keep repeating "I'm the best, I can do
this alone, my way" and you will fail. Keep an open mind, learn from
others and you will more likely succeed.

In my perfect world you build up your own capacity to 70% or so
and sign all sorts of agreements with your outside suppliers to share
technology and you're golden. That's how SEG does it. Read the latest
KMAG/SEG PR about the agreement. I think they're on the right track.
The SEG/RDRT agreement is the same thing.

Of course some Indys simply aren't willing to play that game. Call
Crisman one day and ask why they aren't in the current SEG head calls.
He'll tell you the grim side of those relationships for an Indy!

Lawrence has a VERY good point about the CapEx costs of the
making of heads and media. It simply is too expensive to take on
unless your ready to enjoy the economies of scale. A perfect example
of how NOT to play the game is QNTM's terrible decision to enter into the
MKQC heads op! Geez, why would you setup shop to make 15%
of your heads!??!!? They've gone about it in the completely opposite
direction I think they should have! Terrible business decision!
I don't think that operation will EVER be successful. Volume is key.

SEGs current problems aren't due to their vert integ. It's a management
problem! They got too big for their britches and it came back and bit them
in the butt! The problems there will be solved IMO when they finally admit
that they have a problem and start making changes.
The last CC sounded as if they fnially were stepping
up to the issues at hand, but they might be a Q or 2 late. I'm not sure they
will ever get back to the market share they enjoyed for so long.
Management blew it. Now they're paying for it. SEG shareholders ought to
be screaming bloody murder and looking for some changes in management!
Someone should be made responsible for some very bad decisions.

todd
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