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Technology Stocks : Western Digital (WDC)

WDC 270.16

+7.9%

Feb 2 3:59 PM EST

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To: Sam who wrote (8920)	3/12/1998 4:34:00 PM
From: John Wang	Read Replies (5) of 11057

Sam: I am not trying to support the rumor. But, I do think that there is a strong synergism between IBM and WDC for several reasons: 1) IBM closed their Rochester division. WDC immediately acquired those IBM engineering talents and created the SCSI drive division. That division is doing quite well and is profitable. That was a success story. 2) IBM and WDC have technology cross licensing agreement that covers a lot of drive technologies. 3) IBM is the technology leader. WDC is considered laggard today. It benefits WDC in terms of technology. IBM is not as good in manufacturing execution and efficiency. WD is excellent in that. It benefits IBM in improving manufacturing technology. To illustrate this point: WD probably uses a combination of 3 different head suppliers, 3 media suppliers and three preamp suppliers to make the same desk top HDD that cost the same or less than those of IBM that use only IBM's head, media and preamp. I think that is WD's strength that IBM may want to acquire. 4) IBM is vertically integrated. WDC is "vertual" integrated. Acquiring WD will expand IBM's market position without the need of setting up new factories that requires capital. 5) WDC CEO is ex-IBMer. Again, rumor is rumor until it materializes. Who knows?! John

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