<<GOOD BUY == GOOD BYE$!!! Usually you don't want to catch the falling knife. This is the case of catching the falling 36-sided razer sharp machete>>
Agreed, that appears to have been the case. However, I also believe that the most recent plummet on the WDC / IBM fears has been way overblown, the selling overdone, and has created one of the best tech value-plays I have seen in a long time.
BTW, I feel for those that have rode this stock down from the $20's, as I did the same the summer of '96 when the tech market crashed. I was forced to liquidate my RDRT shares due to a margin call at about $10 knowing full well that I was probably selling the bottom. The stock promptly turned around and proceeded to go up to $30!
After reading back to post 2900, and reviewing recent RDRT and industry news I have come to the following conclusions:
1. The March quarter will be the worst quarter for RDRT. The CEO has clearly stated so on 4/15, and as recently as 4/28 confirmed that he expects sequential revenue growth of 10-20 percent sequentially (expect revenue of $206 - 224M for the June Q).
Message 4248430
2. Multiple indications that the DD industry has turned the corner.
news.com "The inventory correction is much closer to the end than the beginning," Credit Suisse First Boston analyst Charles Wolf, 4/29) Wolf goes on to say "Even if more bad news was in store for these companies, the stocks are not likely to underperform. When the signs that the correction is over are visible, he said, it will already be too late to but these stocks.".................another article:
zdii.com
3. Analyst upgrades of QNTM and SEG this week with aggressive price targets, citing that the worst is over for DD makers.
4. The addition of two very high level engineering executives from IBM and from Seagate on 4/15. Dr Mark Re from IBM managed MR and GMR head development @ IBM , and holds 10 patents. Dr. Menon was the V.P. and Chief Technical Officer of Seagates' recording head group. He has published 30 papers on tribology and the mechanics of magnetic storage systems. Two thoughts here: These guys would not have left the likes of IBM and SEG to join a "loser company", and perhaps one or the other is a pioneer for an eventual joint venture or merger with one of their prior employers.
5. While the IBM / WDC agreement may have some adverse impact on future revenue it is not an exclusive arrangement, and in no way means that RDRT has "lost" WDC as a customer. I also do not believe that a deal of this magnitude was inked in a vacuum such that RDRT management was blindsided by the announcement on 5/4. WDC would not have shit on such a long-term strategic supplier without discussing this with RDRT management. Lowe had to know this was coming when he confirmed his bullish stance on 4/28. Kurtzweil (RDRT CFO) states on 5/4 "The IBM-WDC pact isn't expected to be implemented until early 1999, so it's still too fresh and details aren't out there to get an assessment for 100% of what this means. This doesn't necessarily mean Read-Rite has lost all of Western Digital's business"
6. Seagate is a new customer!!!!! (no comment needed)
7. RDRT has completed the transition to MR technology and has already taken the associated write-down of advanced inductive manufacturing equipment and product. RDRT seems very well positioned to play in the next product cycle (unlike APM).
8. On 4/28, RDRT's stock closed at $13.89 or 54% down from its high of $30.38. At 10 3/4 it's now down 65%.....ouch, I'm sorry. But what this has created is IMHO an incredible buying opportunity to add to, or initiate a new position.
I never thought I'd have the chance to re-do that fiasco of '96 when I sold @ $10. And while I don't see $30 anytime soon (nor will I wait around for it), I'm looking forward to some nice gains from the current price.
Larry
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