Okay, should we talk about fundamentals here as earning euphoria is dissipating.
I concluded from the press release, conference call, and some other sources that
1) The DD market is still highly competitive, especially at the low-end (I guess the party at fault is probably Maxtor, which processes the most cost-effective solution of 2.8GB/p drive and aggressively tries to increase market share.) However, SEG did note that some high end drives are back to allocation with demand slightly outstripping supply.
2) SEG has the 2.1GB/p drives qualified at most OEM's. I wonder who's the victim from which SEG gain market share from... (I would speculate that's most likely WDC as was rumored that several batches of drives were returned due to low quality...)
3) SEG had announced 2.5GB/p drive that's due to ship this quarter. Note that SEG is the third vendor to announce MR drive at that density range behind Maxtor and IBM. But, SEG made it clear though that density range should be short lived.
4) SEG is working on the next generation 3.1GB/p drive, which is predicted to be a major battleground. Expects product announcement before year-end.
5) SEG eyes sub-$1000 market as a major growth area and has designed a drive specifically for that price range. Believes the business is profitable.
IMO, I saw some ANALysts raising their earning estimate for FY99 to ~1.2/sh. Currently, SEG is trading around 23x forward earning, which I believe is more than fair given the DD market condition has yet to show any life. I agree with you that SEG is not "irrationally overpriced." But I don't think it's cheap neither. The problem I observed is that investors have largely ignored the fact that there're more competitions in this industry today compared to just two years ago. I had a feeling that some players had to be gone before the condition gets any better. |
