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Technology Stocks : Disk Drive Sector Discussion Forum
WDC 139.09-0.8%Nov 21 9:30 AM EST
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To: Stitch who wrote (3043)4/25/1998 4:05:00 PM
From: shane forbes  Read Replies (2) of 9256
 
Stitch:

Re: Price stability: Since prices have really never been stable in the disk drive industry I don't expect them to stabilize now.

Ouch.

Let's see if this is better. By way of analogy in the DRAM industry I would guess that average YOY declines are in the order of 35% of so long term. The last 2 years have seen YOY declines of something like 75% or more. So when we talk of DRAM prices stabilizing it does not mean the prices will start shooting up but instead it means that the prices will start returning to long term rates of decline. 35% declines can be handled, 70+% declines and the industry bleeds money seriously. To do this first the prices have to stabilize (stop going down for a few months) then the prices will have to return to more normal decline patterns.

Likewise I would guess a typical DD reduction would be something less than DRAM - perhaps 20-25% YOY. This year the rate of reduction may be somewhere in the 45-60% range. This is not good and like the DRAM people all of a sudden what were profitable companies in the Sept Q of last year are bleeding now. Thus, similar to DRAM, when I say stabilize I do not mean prices going up but instead price declines will start returning to the long term rates of decline. (Of course like DRAM to do this the current prices have to first remain flat even if only for a few weeks and then the rate of decline in prices has to slow. I've seen this with modem chipsets, I saw this a few months ago w/ DRAM [though that may be temporary] and I expect to see this same pattern with DD in the next few months.)

The other important thing is that there may have been s/t rapid growth (and perhaps dumping) from the smaller Asian companies that will go away once (if) the big 4 US companies get their act together and start converting that size advantage (and hopefully corrected technological hiccups) to production efficiencies. A big if.

---

Big time musing: It seems interestingly coincidental to me that the advent of the 1000 PCs sometime since the middle of last year and the Asian currency devaluation began at about the same time. Though I suspect the cheaper clone chips from the likes of NSM and AMD and IDTC and the lack of necessity of increases in MPU power because of the lack of greater software hogs, I think the bulk of the other (non-MPU) reductions came because of the Asian devaluation - 30-50+% reductions in cost overnight means the price of a PC just became much more affordable.

To be optimistic once the Asian currency devaluations stabilize (and I hope and pray that (with the exception of China) this has now happened) the maniacal reductions are running their course.

Now we get back to the proper impetus for price reductions - honest technological improvements not hokey currency devaluations.

----

Shane.
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