Re: Motley Fool Daily Trouble--RDRT
Original link, courtesy Dale Stempson:
fnews.yahoo.com
I've always wanted to see an MF article in a subject that I had a good handle on, to see if MF has a clue or just barfing wind. The best judge of expertise is an expert. I'm not claiming to be an expert, mind you (and I entreat the experts on the thread for their thoughts in this) but the HDD sector I have followed closely for a while now. FWIW here is my analysis:
MF: General chaos in the disk drive industry following turmoil in Asia has led to price-cutting and a rapid technology transition by key Read-Rite customer Western Digital...
Warning sign #1.
"General chaos" is what you say when you don't understand something well enough to explain it cleanly, so you fall back on a catch-all phrase. As a matter of fact there is nothing chaotic about the HDD industry, an amazingly advanced, efficient, and mature industry.
MF: But Seagate's inventory troubles and the ensuing price slashing by Fujitsu, exacerbated by the Asian financial crisis, spelled trouble.
Warning sign #2.
Ah, everybody's favorite whipping boy, Fujitsu. As if they could sink the boat alone. The fact of the matter is, the whole industry overproduced, and with pseudo-commodity products, overproduction=Pain. The author seems to have taken WD's finger-pointing to heart, however, naming Seagate and Fujitsu as the evil harbingers of Satan.
MF: The good news is that the market has now squarely adopted MR technology, and Read-Rite is coming along.
Well.
What to say about that.
Such a glib wrapup of a fairly complex environment. No mention of how IBM invented MR a thousand years ago, or how Quantum struggled with MR for years, or JTS even now cranking out high-cap MIG drives, or lack of MR in removables, or MR platter issues ...
--Bottom Line--
The article has a sound chronology of recent events affecting RDRT, but it has neither a good grasp on industry dynamics, nor does it present much useful information relevant to the investment decision. Nor does it even mention The Most Critical Factor determining the destinies of these firms: HDD demand.
Yea, verily, a little knowledge is a dangerous thing.
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