Points well taken, SL. (If you are Siva, you can have even more hands that you needed for your post.)
The question any long term investor/player in this business would have to ask is whether this business will settle down into a "mature" business with, say, 3-5 major companies splitting the pie, or will it always attract wanna-be-there-at-whatever-cost competition. Looking at the new wanna bes, they aren't really so new--IBM, Fujitsu and Maxtor have been there, done that, for quite awhile with varying degrees and kinds of success in the past. When a powerful company like HWP tried to enter the business a few years ago, they decided fairly quickly to get out--they saw the potential dangerous sinkhole aspects of the business. Which still suggests one longer term optimistic scenario (he stubbornly and perhaps stupidly said)--if consolidation does take place, the temperature of the price wars would be lowered, and profitability restored to remaining companies in a business with still healthily (if at times cyclically) growing demand.
Then the question becomes, will that profitability inevitably suck in other aspirants, or will these other potential suppliers be reluctant to take the risks? Perhaps the only companies that should be in this business are those like IBM and Fujitsu that have other businesses to smooth out the cycles. |
